Simple Interest Calculator
Calculate interest earned using the simple interest formula.
Inputs
$
%
Results
Total Amount
$12,500.00
Total Interest
$2,500.00
Formula
A = P(1 + rt) | Interest = P × r × t
Where P = principal, r = annual rate (decimal), t = time in years. Unlike compound interest, simple interest is calculated only on the original principal.
Worked Example
Principal: $10,000
Rate: 5% per year
Time: 3 years
Interest = $10,000 × 0.05 × 3 = $1,500
Total: $10,000 + $1,500 = $11,500
When to Use This Calculator
Use simple interest for short-term loans, auto loans (simple interest type), and scenarios where interest does not compound.
Important Assumptions
- Interest rate is constant.
- Interest does not compound.
- No fees or taxes.
Common Mistakes to Avoid
- Using simple interest for long-term projections where compound interest applies.
- Confusing simple interest with compound interest — compounding always yields more over time.
Frequently Asked Questions
When is simple interest used in real life?
Simple interest is common in auto loans, some personal loans, and short-term borrowing. Savings accounts and most investments use compound interest.
Is simple interest always less than compound interest?
For the same rate and time period (>1 compounding period), yes. Compound interest earns interest on interest, while simple interest is calculated only on the original amount.
Related Calculators
Methodology: This calculator uses standard financial formulas documented above. All calculation engines are unit-tested for accuracy.View full methodology
Disclaimer: This calculator provides estimates for educational purposes only. Results do not constitute financial advice.Full disclaimer