Simple interest is the most straightforward way to calculate how much your money earns or costs over time. Unlike compound interest, simple interest is calculated only on the original principal — no interest on interest. Our simple interest calculator gives you the total interest earned or owed, and the final amount, in seconds.

The formula, explained simply

The formula is I = P × r × t, where P is the principal, r is the annual interest rate as a decimal, and t is time in years. We multiply your principal by the rate and the number of years to get the total interest. Then we add the interest to the principal to get the final amount. It is the math behind many short-term loans, savings accounts, and bonds.

When you would use this

Savings account holders calculate interest on fixed deposits. Students learn the basics of interest math. Short-term lenders compute what they will earn. Anyone comparing a simple interest loan to a compound interest loan sees the difference. It is also useful for calculating late payment fees or early withdrawal penalties.

Frequently asked questions

What is the difference between simple and compound interest?

Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus any accumulated interest — interest on interest.

When is simple interest used?

Car loans, short-term personal loans, some savings accounts, and Treasury bills often use simple interest.

Which earns more — simple or compound?

Compound interest always earns or costs more over time because you earn interest on the interest.

Can simple interest be daily or monthly?

Yes, the formula can be adapted for different periods by dividing the rate by the number of periods per year.

Is simple interest better for borrowers?

Generally yes, because you pay interest only on the original amount. With compound interest, the interest grows faster.