Financial Tool

Simple Interest Calculator

Calculate interest on loans or savings without compounding. Ideal for short-term lending and basic investment comparisons.

Principal ($)

Rate (%)

Time (Years)

Σ The Formula

Interest = Principal × Rate × Time / 100

Real World Examples

Personal Loan

$5,000 at 5% for 3 years: $5,000 × 0.05 × 3 = $750 interest

Short-Term Investment

$10,000 bond at 4% for 2 years: Earns $800 total

Auto Loan Estimate

$20,000 at 3% simple interest for 5 years: Pay $3,000 in interest

# About This Calculator

The Simple Interest Calculator determines the amount of interest earned or paid on a principal sum over a specific period. Unlike compound interest, simple interest is calculated only on the original amount, making it linear and predictable. This tool is frequently used for short-term loans, bonds, and basic financial literacy education.

How Simple Interest Works

Simple interest is the cost of borrowing money (or the reward for lending it) that does not snowball over time. The formula is straightforward:

I = P × r × t

I (Interest): The dollar amount of interest.
P (Principal): The starting amount (loan or investment).
r (Rate): The annual interest rate in decimal form (e.g., 5% = 0.05).
t (Time): The time period in years.

Real-World Examples

Short-Term Loans

Many car loans and personal loans use simple interest. if you pay off the loan early, you save money on interest because it accrues daily based on the principal balance.

Bonds & CDs

Certain government bonds and non-compounding certificates of deposit (CDs) pay simple interest. You receive a fixed check every year, but that money doesn't automatically reinvest.

Simple vs. Compound Interest

The key difference is what the interest is calculated on:

Simple Interest: Calculated ONLY on the principal. Growth is constant (linear).
Compound Interest: Calculated on the principal PLUS accumulated interest. Growth accelerates (exponential).

How To Use

Enter the **Principal Amount** (starting balance).
Enter the annual **Interest Rate**.
Enter the **Time Period** in years.
Click **Calculate** to see total interest and final amount.

Frequently Asked Questions

Who uses simple interest today?+

While most consumer products (credit cards, mortgages) use compound interest, simple interest is still used for short-term personal loans, car loans (sometimes), and certain types of bonds or Treasury notes.

How do I calculate interest for months instead of years?+

Convert the months to years by dividing by 12. For example, 18 months is 1.5 years. Then plug 1.5 into the 'Time' field.

Can I use this to compare different loan offers?+

Yes! Calculate the total interest for each loan option. A $10,000 loan at 4% for 3 years costs $1,200 in interest, while the same loan at 5% costs $1,500. Always compare both rate and term.

What's a good simple interest rate?+

It depends on the context. For savings (2024): 4-5% is good. For loans: under 6% is excellent, 6-10% is average. Always compare current market rates and consider inflation.

Does simple interest include fees?+

No. Simple interest calculation strictly looks at the principal and rate. It does not account for origination fees or service charges (Use the APR Calculator for that).

Is Simple Interest Calculator free to use?+

Yes, Simple Interest Calculator on Matheric is completely free to use. We believe in accessible education and utility for everyone.