What is simple interest?

Simple interest is charged only on the original principal, not on interest already earned. So the interest is the same each period. The formula is principal times rate times time, where rate is the annual rate as a decimal and time is in years.

How is simple interest different from compound interest?

Simple interest is calculated on the principal alone, while compound interest is calculated on the principal plus any interest already added. Over long periods compound interest grows much faster, which is why savings usually compound and short term loans often use simple interest.

What is the simple interest formula?

Interest equals principal times annual rate times time in years. For example $1,000 at 5% for 3 years is 1,000 times 0.05 times 3, which is $150 of interest, and a total of $1,150.

Simple Interest Calculator

Use this calculator to work out simple interest on a loan, deposit or savings amount, where interest is charged on the original sum only rather than building on itself. Simple interest is common for shorter term loans and some savings products because it is predictable: the same dollar amount of interest applies every year the rate and principal stay the same. Enter your principal, the annual interest rate as a percentage, and the time period in years. The calculator instantly returns the simple interest earned or owed, the total amount (principal plus interest), and the principal you started with, so you can see how the figures add up at a glance. It uses the standard formula: interest equals principal multiplied by the annual rate multiplied by the time in years. Adjust any of the three figures and the results update straight away, useful for comparing a short personal loan, a term deposit, or checking how a rate change affects the total you pay or earn. Because simple interest ignores any interest already accrued, it gives a lower return than compound interest over the same period, and the gap widens the longer the money is invested or borrowed. Use it alongside the compound interest calculator to see how much more a deposit could earn when interest compounds annually. As with any interest calculation, actual outcomes depend on the exact rate, term and any fees your bank or lender applies, so treat the figures here as indicative planning estimates rather than a guaranteed return or repayment amount.

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Principal

Annual rate

Time (years)

simple interest

Total$0

Principal$0

How simple interest works

Simple interest is calculated on the principal alone. The formula is interest equals principal times the annual rate times the time in years. Because it ignores interest already earned, the amount is the same every year, unlike compound interest which builds on itself.

Worked example

A $1,000 deposit at 5% for 3 years earns 1,000 times 0.05 times 3, which is $150 of interest. The total is $1,150. If the same money compounded annually, it would earn slightly more, about $157, because each year's interest would also earn interest.

Related calculators

Compound Interest Calculator: interest that builds on itself.
Loan Interest Calculator: interest on a loan.
Savings Calculator: grow your savings over time.
Term Deposit Calculator: interest on a term deposit.

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