Simple Interest Calculator
Calculate interest charged or earned on a principal amount at a fixed rate, with no compounding.
The formula
Simple Interest = (P × r × t) ÷ 100, where P is the principal, r is the annual rate (%), and t is the time in years. Unlike compound interest, the interest earned each year is always calculated on the original principal only.
Worked example
A principal of 50,000 at 6% annual interest for 3 years earns (50,000 × 6 × 3) ÷ 100 = 9,000 in interest, for a total of 59,000.
Frequently asked questions
When is simple interest used in practice?
Simple interest is common for short-term loans, certain bonds, and some car loans. Most savings accounts, mutual funds, and long-term loans use compound interest instead.
Does the interest change year to year?
No — with simple interest, the same dollar amount of interest accrues every year, since it's always calculated on the original principal rather than the growing balance.