Simple Interest Calculator - Calculate Interest, Principal, Rate & Time
Use our free simple interest calculator to calculate interest on loans and investments. Our interest calculator helps you find principal, rate, time, or interest amount using the simple interest formula. Perfect for loan interest calculator calculations, investment interest calculator planning, and understanding how simple interest works compared to compound interest.
Calculate simple interest for personal loans, car loans, savings accounts, and investments. Get instant results with detailed formulas and explanations.
Simple Interest Calculator
Simple Interest Results
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Frequently Asked Questions About Simple Interest
What is simple interest and how does it differ from compound interest?
Simple interest is calculated only on the principal amount (the original sum borrowed or invested), while compound interest is calculated on the principal plus any previously earned interest. Simple interest grows linearly over time, making it easier to calculate and predict. For example, if you invest $1,000 at 5% simple interest for 3 years, you'll earn $150 in interest ($1,000 × 0.05 × 3). With compound interest, you'd earn slightly more because interest is added to the principal each period.
When is simple interest used in real life?
Simple interest is commonly used for short-term loans, car loans, personal loans, and some savings accounts. Many financial institutions use simple interest for loans with terms of one year or less. It's also used in some investment products and government bonds. Understanding simple interest helps you compare loan offers and calculate the true cost of borrowing.
How do I calculate simple interest manually?
Use the simple interest formula: I = P × R × T, where I is interest, P is principal (the initial amount), R is the annual interest rate (as a decimal), and T is time in years. For example, to calculate interest on a $5,000 loan at 6% for 2 years: I = $5,000 × 0.06 × 2 = $600. The total amount repaid would be $5,600 ($5,000 principal + $600 interest).
What's the difference between annual and monthly interest rates?
Annual interest rates are expressed as a percentage per year (e.g., 6% per annum), while monthly rates are the annual rate divided by 12. When calculating simple interest, always ensure your time period matches your rate period. If you have an annual rate of 6% and want to calculate for 6 months, use T = 0.5 years (6 months ÷ 12). Our calculator handles these conversions automatically.
Can I use this calculator for loans and investments?
Yes! Our simple interest calculator works for both loans and investments. For loans, it helps you understand how much interest you'll pay over the loan term. For investments, it shows how much interest you'll earn. Simply enter the principal amount, interest rate, and time period to get instant results. This is particularly useful for comparing different loan offers or investment options.
How accurate are simple interest calculations?
Our simple interest calculator provides accurate calculations based on the standard simple interest formula. However, actual loan terms may include additional fees, compounding periods, or payment structures that affect the total cost. Always review your loan agreement or investment terms carefully. For complex financial decisions, consult with a financial advisor or lender.