About the Simple Interest Calculator
Simple interest is charged only on the original principal — it never earns interest on interest the way compound interest does. It's common in some short-term loans and a useful baseline for understanding borrowing costs.
How it’s calculated
Interest = principal × (annual rate ÷ 100) × time in years. Final balance = principal + interest.
Example calculation
$5,000 at 5% simple interest for 3 years earns $750 in interest, for a final balance of $5,750.
Frequently asked questions
How is simple interest different from compound?
Simple interest is always calculated on the original principal, so it grows in a straight line. Compound interest is calculated on principal plus accumulated interest, so it grows faster over time.
When is simple interest used?
Some auto and short-term personal loans, and many informal loans. Most savings accounts and credit cards use compound interest instead.
This calculator provides estimates for educational purposes and should not be considered financial, tax, or legal advice. Your actual figures may vary with lender terms, fees, and market conditions.