Simple Interest Calculator
Calculate simple interest on a loan or savings amount, and see how it compares to compound interest.
Interest Details
The Simple Interest Formula
I = P × r × t
- I = Interest earned or owed
- P = Principal (starting amount)
- r = Annual interest rate (as a decimal)
- t = Time in years
Frequently Asked Questions
Simple interest is calculated as I = P x r x t, where P is the principal (starting amount), r is the annual interest rate as a decimal, and t is the time in years. Unlike compound interest, simple interest is always calculated on the original principal only - it never earns interest on previously accumulated interest.
Simple interest is common for short-term loans, car loans, some personal loans, and certain bonds. It is less common for savings accounts and long-term investments, which almost always use compound interest because it grows faster.
Simple interest is calculated only on the original principal for the whole term. Compound interest is recalculated periodically (e.g. annually or monthly) on the principal plus any interest already earned, so the amount grows faster over time. Over short periods the difference is small, but it becomes significant over many years.
Yes - the simple interest formula is identical whether you are calculating interest owed on a loan or interest earned on a deposit. Just enter the principal amount, annual rate, and term to see the total interest and final amount either way.