Simple Interest Calculator
Calculate simple interest using principal, annual rate, and time in years.
Simple Interest Calculator tool
Simple interest does not compound. For compounding calculations, use the Compound Interest Calculator.
Simple interest is calculated using the formula: Interest = Principal × Rate × Time. The rate must be expressed as a decimal (6% → 0.06).
Unlike compound interest, simple interest does not accumulate interest on previously earned interest. The total grows linearly over time.
This formula is often used for short-term financial calculations and certain loan agreements.
Examples
- $5,000 at 6% for 2 years → Interest = $600
- $10,000 at 4% for 1.5 years → linear interest calculation
- Set rate to 0% → total equals principal
FAQ
- What is simple interest?
Simple interest is calculated only on the original principal. It does not compound over time.
- How is it different from compound interest?
Compound interest earns interest on both principal and accumulated interest. Simple interest applies only to the original principal.
- Can I enter fractional years?
Yes. For example, 2.5 years represents two years and six months.
- Does this include fees or taxes?
No. This tool provides a mathematical estimate only.
- When is simple interest used?
It is commonly used for short-term loans, certain bonds, and basic financial calculations.