Simple Interest Calculator
Formula
Interest = Principal × Rate × Time
Simple interest is calculated only on the original principal, not on accumulated interest. Unlike compound interest, the interest earned each year stays the same.
How to use
- Enter your starting amount in the Principal field.
- Set the Annual Rate (%) and the number of Years.
- Read the interest earned and your total balance.
Example
With $10,000 at 5% for 5 years: $10,000 × 5 ÷ 100 × 5 = $2,500 interest, for a total balance of $12,500.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus all accumulated interest, so it grows faster.
Where is simple interest used?
Car loans, short-term personal loans, and some bonds use simple interest. Savings accounts use compound interest; mortgages and most installment loans charge simple interest on the outstanding balance each month.
How much interest does $10,000 earn at 5% simple interest for 5 years?
$10,000 × 5% × 5 years = $2,500 in interest, for a total balance of $12,500.
How do I find the interest rate or time from simple interest?
Because the formula is Interest = Principal × Rate × Time, you can rearrange it to solve for any missing value. To find the rate, divide the interest by (principal × time); to find the time, divide the interest by (principal × rate). For example, earning $2,500 on a $10,000 principal over 5 years gives a rate of $2,500 ÷ ($10,000 × 5) = 0.05, or 5%.
How does daily simple interest work on a loan?
Many auto and personal loans use daily simple interest, meaning interest accrues on the outstanding balance each day rather than on a fixed monthly schedule. The daily charge is roughly the balance × (annual rate ÷ 365), so paying early in the billing cycle or making extra payments reduces the interest you owe. This is why paying a loan a few days early can save a small amount each month.