Simple Interest Calculator
Calculate simple interest with the I = P·r·t formula, plus a side-by-side comparison to compound interest. Runs in your browser.
Result
- Simple interest (I = P·r·t)
- $1,500.00
- Total (principal + interest)
- $11,500.00
- — vs compound interest
- $1,576.25
- — compounding earns extra
- $76.25
Simple interest uses the formula I = P × r × t — interest is charged only on the original principal, never on accumulated interest. It is used for some short-term loans, bonds, and auto loans. Compound interest (shown for comparison) earns interest on interest, growing faster over time. Informational.
About this tool
Simple interest is the most basic way interest is calculated: it accrues only on the original principal, never on previously earned interest. The formula is I = P × r × t — principal times the annual rate (as a decimal) times the time in years. This calculator computes the interest and the total amount, and to make the concept concrete it also shows what the same principal, rate, and time would yield under compound interest, where interest earns interest. The difference is small over short periods but grows substantially over long ones, which is why savings and investments benefit from compounding while many short-term loans, bonds, and some auto loans use simple interest. Understanding which one applies matters: simple interest is predictable and linear, compound interest accelerates. Use this to check loan or bond interest quickly and to see the cost of the distinction. It is informational, not financial advice. Everything runs in your browser.
How to use it
- Enter the principal (P).
- Enter the annual interest rate (r) and the time in years (t).
- Read the simple interest and total.
- Compare to the compound figure to see how much compounding adds.
Frequently asked questions
- What is the simple interest formula?
- I = P × r × t: interest equals principal times the annual rate (as a decimal) times time in years. For $10,000 at 5% for 3 years: 10,000 × 0.05 × 3 = $1,500. The total owed or earned is principal plus interest.
- How is simple interest different from compound?
- Simple interest accrues only on the original principal, so it grows linearly. Compound interest accrues on principal plus accumulated interest, so it grows exponentially. Over long periods, compound interest yields significantly more.
- When is simple interest used?
- Many short-term and consumer loans (some auto loans, personal loans), most bonds (coupon payments on face value), and some mortgages use simple interest. Savings accounts, credit cards, and investments typically compound.
- Does simple interest favor borrowers or lenders?
- For a borrower, simple interest is generally cheaper than compound over the same rate and term, because you never pay interest on interest. For a saver, compound is better since your interest earns more interest.
- How do I convert the rate if it is monthly?
- Use a consistent time unit. If the rate is annual, t is in years; for a monthly rate, express t in months and use the monthly rate. The formula is the same as long as r and t use the same period.
- Is anything uploaded?
- No. The calculation runs entirely in your browser.