Simple Interest Calculator
Interest and total amount
What Is Simple Interest?
Simple interest is calculated only on the original principal amount, without compounding. Interest earned does not earn further interest. Common in short-term loans and some savings accounts.
How to Calculate Simple Interest
Formula: Interest = Principal × (Rate÷100) × Time | Total = Principal + Interest
Example: $5,000 at 8% annual for 3 years: Interest = $5,000 × 0.08 × 3 = $1,200 | Total = $6,200
Simple vs Compound Interest
- Simple: Linear growth — interest stays the same each period
- Compound: Exponential growth — interest earns interest
- For long periods, compound interest grows significantly more
FAQ
When is simple interest used?
Car loans, personal loans, short-term deposits, bonds, and some mortgages use simple interest.
How do I convert monthly rate to annual?
Multiply by 12. Example: 1.5% monthly = 18% annual (simple interest).