What is simple interest?

Simple interest is interest calculated only on the original principal. Each period adds the same amount of interest, because the base never grows. It is the opposite of compound interest, which earns interest on interest.

How do I calculate simple interest?

Use Interest = P x R x T / 100, where P is the principal, R is the annual rate as a percentage and T is the time in years. Add the interest to the principal to get the total amount.

Can I enter the time in months or days?

Yes. Choose months or days in the time unit dropdown and the tool converts the period to years first: months are divided by 12 and days by 365.

What is the difference between simple and compound interest?

Simple interest is always calculated on the original principal, so growth is linear. Compound interest adds the earned interest to the balance, so later periods earn on a larger base and growth accelerates over time.

Where is simple interest used in real life?

Simple interest appears in many short-term personal and auto loans, certain bonds and certificates of deposit, and some student loans. Check your agreement to confirm which method applies.

Why does the tool show a yearly breakdown?

The table shows the interest added in each year, the cumulative interest and the running balance. Because simple interest is linear, each full year adds the same amount, and partial years are prorated.

Does the calculator use a 360 or 365 day year?

It uses a 365-day year when converting day-based periods. Some commercial contracts use a 360-day convention, which gives a slightly different result; adjust your inputs if your contract specifies 360.

Is the simple interest calculator free and private?

Yes. It runs entirely in your browser with JavaScript. Your principal, rate and time are never uploaded, stored or logged.

Why is the interest on long-term simple interest so low?

Because the interest base never grows. Every year adds the same amount, unlike compounding where each year's interest also earns interest. Over long periods that difference becomes very large.

What is the difference between simple and compound interest?

Simple interest is charged only on the original principal, so the interest amount stays the same every period. Compound interest adds each period's interest to the principal, so the interest grows over time. The gap between them widens the longer the money is borrowed or invested.

How do I calculate the total repayment for a simple interest loan?

Multiply the principal by the rate and the time in years to get the total interest, then add that to the principal. A $2,000 loan at 8 percent for 2 years carries $320 of interest, making the total repayment $2,320.

Does the calculator work with daily or monthly interest periods?

Yes. Express the rate and the time in matching units. For monthly periods, divide the annual rate by 12 and give the time in months. For daily periods, divide the annual rate by 365 and give the time in days.

Why do banks use compound interest for savings but simple interest for some loans?

Banks pay compound interest on savings because they are competing for your money, but they often quote simple interest on short-term loans because the total is easy to explain and compare. The loan documents always state which method applies.

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Simple Interest Calculator

Calculate simple interest, maturity amount, and monthly payments for any loan or deposit.

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About Simple Interest Calculator