Simple Interest Calculator
Calculate simple interest and the total amount due over time.
Result
Interest
150.00
Total amount
1,150.00
How it works
Simple interest is the most basic way to price a loan or a deposit: it is charged only on the original amount (the principal), never on interest already earned. The formula is I = P × r × t — principal times the annual rate times the number of years. Because the interest never compounds, the amount owed or earned grows in a straight line: 1,000 at 5% simple interest earns exactly 50 every year, giving 1,150 after three years. Compound interest, by contrast, would earn a little more each year. Simple interest is common for short-term loans, car financing, some bonds and informal lending, where the term is short enough that compounding makes little difference. For long horizons, compounding is what really matters.
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Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is always calculated on the original principal only. Compound interest is calculated on the principal plus accumulated interest, so it grows faster over time.
When is simple interest used?
Typically for short-term loans, car loans, some bonds and informal lending, where the short term makes compounding negligible.
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