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Simple Interest Calculator

Updated January 2026

A simple interest calculator helps you quickly determine the interest cost or earnings on any loan or investment where interest is calculated only on the principal. Simple interest is commonly used for short-term loans and certain bonds.

How to Use This Calculator

Enter the principal amount (the initial sum of money), the annual interest rate as a percentage, and the time period in years. The calculator will instantly show the total interest earned or owed, and the total amount (principal plus interest). You can adjust any input to see how changes affect the outcome.

How It's Calculated

Simple interest uses a straightforward formula:

Interest = P × r × t

Where P is the principal amount, r is the annual interest rate expressed as a decimal (e.g., 5% = 0.05), and t is the time in years. Unlike compound interest, there is no "interest on interest" effect — each period's interest is based solely on the original principal.

Frequently Asked Questions

Simple interest is calculated only on the original principal amount, so the interest earned or paid is the same each period. Compound interest earns interest on both the principal and previously accumulated interest, leading to exponential growth. For loans, simple interest is more favorable for borrowers because total interest costs are lower. For investments, compound interest is far more powerful for building long-term wealth.
Most federal student loans use simple interest, where interest accrues daily based only on the outstanding principal. Some auto loans and personal loans also use simple interest. However, most mortgages and credit cards use compound interest (typically compounding daily or monthly). Always check your loan agreement to understand how interest is calculated, as simple interest loans can be cheaper if paid off early.
Simple interest is calculated using the formula Interest = P × r × t, where P is the principal amount, r is the annual interest rate (as a decimal), and t is the time in years. For example, a $5,000 loan at 6% simple interest for 3 years would cost $5,000 × 0.06 × 3 = $900 in total interest. The total amount due would be $5,000 + $900 = $5,900.

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