Simple Interest Calculator

Simple interest is interest that is calculated only on the initial principal amount borrowed or invested. Unlike compound interest, simple interest does not accumulate on previously earned interest. The formula for simple interest is: I = P × r × t, where I is the interest, P is the principal, r is the annual interest rate, and t is the time in years.

Simple interest is calculated using the formula: I = P × r × t. For example, if you invest $10,000 at 5% annual interest for 3 years, the calculation would be: $10,000 × 0.05 × 3 = $1,500. The total amount after 3 years would be $10,000 + $1,500 = $11,500.

Simple interest is calculated only on the original principal amount, while compound interest is calculated on both the principal and any accumulated interest. Compound interest typically results in higher returns over time because you earn interest on your interest. Simple interest is often used for short-term loans or investments, while compound interest is more common for long-term investments.

Simple interest is commonly used for short-term loans, car loans, personal loans, and some types of bonds. It's also used in some savings accounts and certificates of deposit (CDs) that pay simple interest rather than compound interest. Simple interest is preferred when you want predictable, linear growth without the complexity of compounding.

Yes, you can calculate simple interest for any time period. The key is to convert the time period to years. For example, for 6 months, use 0.5 years; for 18 months, use 1.5 years; for 90 days, use 90/365 = 0.247 years. Our calculator handles years, months, and days automatically.

If you know the interest earned, rate, and time, you can find the principal using the formula: P = I / (r × t). For example, if you earned $500 in interest at 5% for 2 years, the principal would be: $500 / (0.05 × 2) = $5,000.

If you know the principal, interest earned, and time, you can find the interest rate using the formula: r = I / (P × t). For example, if you invested $10,000 and earned $1,000 in interest over 2 years, the rate would be: $1,000 / ($10,000 × 2) = 0.05 or 5%.

Simple interest offers predictable, linear growth that's easy to understand and calculate. It's transparent - you know exactly how much interest you'll earn or pay. Simple interest is often better for borrowers on short-term loans since they don't pay interest on accumulated interest. It's also useful for financial planning when you need consistent, predictable returns.

Simple interest typically provides lower returns compared to compound interest over long periods. As an investor, you miss out on the potential for exponential growth that compound interest offers. Simple interest doesn't account for the time value of money as effectively as compound interest, which can be a disadvantage for long-term investments.

Simple interest is generally better for borrowers because they pay less total interest over time compared to compound interest loans. However, for lenders or investors, simple interest typically provides lower returns. Most modern financial products use compound interest because it better reflects the true cost of borrowing and the potential returns on investment.