Simple Interest Calculator
$
5.00%
5 yrs
Interest Earned$2,500.00
Total Amount$12,500.00
Simple interest is charged only on the original principal and never on the interest already accrued, which makes it the most straightforward way to price short-term loans and some fixed deposits. This calculator multiplies your principal, annual rate, and time in years to find the flat interest, then adds it to the principal to show the total amount due or earned at the end of the term.
Formula
I = P × r × t; A = P + I
- P
- Principal (starting amount)
- r
- Annual interest rate as a decimal = rate% ÷ 100
- t
- Time in years
- I
- Total simple interest over the term
- A
- Final amount = principal plus interest
How it works
- Enter the principal amount, the annual interest rate as a percentage, and the term in years.
- The calculator multiplies principal by the rate (divided by 100) and by the number of years to get the total interest, which stays constant each year because it never compounds.
- It adds that interest to the principal to display the total amount, and rounds both figures to the nearest cent.
Worked example
A $5,000 deposit earning 4% simple interest for 3 years.
- Convert the rate: 4% = 0.04.
- Interest: 5,000 × 0.04 × 3 = $600.
- Total amount: 5,000 + 600 = $5,600.
Interest earned is $600 and the final amount is $5,600.
Frequently asked questions
- How does simple interest differ from compound interest?
- Simple interest applies the rate only to the original principal every period, so the interest is the same each year. Compound interest also charges interest on previously accrued interest, so the balance grows faster over time.
- Where is simple interest actually used?
- It is common on short-term and auto loans, some personal loans, certain bonds, and many car-title or payday products. It is rarely used for savings accounts, which usually compound.
- Can I enter a partial year for the time?
- Yes. Because the formula multiplies by time directly, a fractional term works; for example, 0.5 represents six months and 1.5 represents eighteen months. The interest scales proportionally with the time you enter.