Simple Interest Calculator

Simple interest is calculated only on the principal amount, not on accumulated interest. The formula is SI = P x R x T / 100, where P is principal, R is annual interest rate, and T is time in years. It is commonly used for short-term loans and some car loans.

Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus accumulated interest. For the same rate and term, compound interest always yields more total interest. Use our toggle to see the difference side by side.

Simple interest is commonly used for short-term personal loans, some auto loans, student loans, and mortgages with simple interest structures. Most credit cards and long-term investments use compound interest instead.

To calculate simple interest on a loan, multiply the principal by the annual interest rate (as a decimal) by the time in years. For example, $10,000 at 5% for 3 years = $10,000 x 0.05 x 3 = $1,500 in interest.