Simple Interest Calculator
Calculate simple interest and total repayment for a fixed principal and rate.
Simple interest is the more straightforward cousin of compound interest — it's calculated only on your original principal, never on interest you've already earned. Some loans and short-term instruments use this method.
The formula
Simple interest is I = P × r × t, where P is principal, r is the annual rate (as a decimal), and t is time in years. Unlike compound interest, the interest earned each year is identical — it doesn't grow, because it's always calculated against the same starting principal.
Where simple interest actually shows up
Some short-term personal loans, car loans, and certain bonds use simple interest. Most savings accounts, credit cards, and long-term investments use compound interest instead, since it's more common (and typically more favorable to the lender or the saver, depending on which side you're on).
Frequently asked questions
Which is better for a saver — simple or compound interest?
Compound interest is better for savers and investors, since your balance grows faster over time as interest earns its own interest. Simple interest is more favorable to whoever is paying the interest, since the amount owed grows more slowly.
How do I know if my loan uses simple or compound interest?
Check your loan agreement or ask your lender directly — it's not always obvious from the interest rate alone, and the method significantly affects your total repayment on longer-term loans.