Simple Interest Calculator
Work out simple interest (without compounding) on a loan or investment — interest amount and total amount.
How to use the simple interest calculator
- Enter the principal (the amount interest is calculated on).
- Enter the annual interest rate, in percent.
- Enter the time period in years.
- The interest amount and total amount update automatically.
What's the difference between simple interest and compound interest?
With simple interest, interest is calculated only on the original principal, every year — the accrued interest is not added to the base for the next year's interest calculation. The formula is I = P × r × t, where P is the principal, r is the interest rate (as a decimal) and t is the time in years.
With compound interest (the most common approach for loans and savings in practice), accrued interest is added to the principal along the way, so you also earn interest on the interest. Use our compound interest calculator if that's what you're after.
Worked example: $100,000 at 5 % for 3 years gives 100,000 × 0.05 × 3 = $15,000 in interest, or $115,000 in total. With compound interest the same deposit would reach 100,000 × 1.05³ = $115,763 — $763 more. The gap is small over three years but widens fast: over 30 years simple interest gives $250,000, while compounding gives more than $430,000.
Frequently asked questions
When is simple interest used in practice?
Simple interest is typically used for short-term loans, some bonds, and private loan agreements where both parties agree that interest won't be capitalized (added to the principal) along the way.
Does simple interest give a lower or higher interest amount than compound interest?
For the same interest rate and time period, simple interest always produces a lower (or equal, for very short periods) total interest amount than compound interest, since compound interest also earns a return on previously accrued interest.
Can I use this to calculate a mortgage?
No — mortgages use compound interest (and usually principal repayments along the way) — use our compound interest calculator or a dedicated mortgage calculator for a more realistic estimate.