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Simple Interest Calculator - Calculate Interest Easily

Free simple interest calculator. Calculate interest earned on your principal using the formula I = P x R x T. Perfect for loans, savings, and investments.

iAbout This Calculator

The simple interest calculator helps you quickly determine how much interest you'll earn or owe based on a principal amount, interest rate, and time period. Unlike compound interest, simple interest is calculated only on the original principal, making it straightforward and predictable. This calculator is ideal for short-term loans, certificates of deposit, car loans, and basic savings calculations. Enter your values to instantly see how much interest accumulates over time.

?How to Use

  1. 1

    Enter the principal amount (the initial sum of money)

  2. 2

    Input the annual interest rate as a percentage (e.g., 5 for 5%)

  3. 3

    Specify the time period in years

  4. 4

    Click Calculate to see the total interest and final amount

  5. 5

    Review the yearly breakdown to see how interest accumulates each year

fFormula

I = P \times R \times T

Simple interest is calculated by multiplying the principal (P) by the annual interest rate (R) expressed as a decimal, and then by the time (T) in years. The total amount is the principal plus interest: A = P + I.

I
Interest earned or owed
P
Principal (initial amount)
R
Annual interest rate (as decimal)
T
Time in years
A
Total amount (Principal + Interest)

Examples

Basic Savings Example

Inputs: principal: 1000, rate: 5, time: 3
$1,150.00

$1,000 at 5% for 3 years earns $150 in simple interest

Car Loan Interest

Inputs: principal: 15000, rate: 6, time: 5
$19,500.00

A $15,000 car loan at 6% for 5 years costs $4,500 in interest

Short-term Investment

Inputs: principal: 5000, rate: 4, time: 2
$5,400.00

$5,000 invested at 4% for 2 years yields $400 in interest

Use Cases

Personal Loans

Calculate interest costs on personal loans with fixed rates

Car Financing

Estimate total interest paid on auto loans

Certificates of Deposit

Determine earnings on CDs with simple interest

Student Loans

Calculate interest on subsidized student loans during grace periods

Frequently Asked Questions

What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal amount, resulting in linear growth. Compound interest is calculated on the principal plus accumulated interest, resulting in exponential growth. Over time, compound interest yields significantly more than simple interest.
When is simple interest used in real life?
Simple interest is commonly used for car loans, short-term personal loans, some certificates of deposit, and calculating interest during grace periods on student loans. It's also used for bonds and some types of savings accounts.
How do I calculate simple interest for months instead of years?
Convert months to years by dividing by 12. For example, 6 months = 0.5 years, 18 months = 1.5 years. Then use the standard formula I = P x R x T with the converted time value.
Is simple interest better than compound interest?
It depends on your perspective. For borrowers, simple interest is better as you pay less over time. For savers and investors, compound interest is better as you earn more. The difference becomes more significant over longer time periods.

Conclusion

Understanding simple interest is fundamental to financial literacy. While it may not offer the growth potential of compound interest for savings, it provides predictable, easy-to-calculate costs for loans. Use this calculator to quickly estimate interest on short-term financial products and make informed borrowing or investing decisions.