Simple Interest Calculator

How to use this calculator

Enter three things and the result updates instantly. Set the principal — the amount you borrow, lend, or deposit. Set the annual interest rate as a percentage. Then set the time in years the money is held. The calculator shows the simple interest you earn or owe, the total amount at the end, and how that compares with compound interest. Drag the sliders or type exact figures to model a loan, a bond, or a fixed deposit in seconds.

How this is calculated

Simple interest uses one tidy formula: interest = principal × rate × time ÷ 100. The rate is the annual percentage and time is measured in years, so a 5% rate over 5 years on $10,000 gives $10,000 × 5 × 5 ÷ 100 = $2,500 of interest. The total amount is simply the principal plus that interest. Crucially, interest is charged only on the original principal — it never earns interest on itself — which is what separates simple interest from compound interest.

Educational estimate, not financial advice — see our disclaimer.

A worked example

Suppose you deposit $10,000 at a 5% annual simple interest rate for 5 years. Each year you earn a flat $500 (5% of the original $10,000), and because simple interest ignores prior earnings, that figure never changes. Over five years you collect $500 × 5 = $2,500, leaving a total of $12,500. Double the time to 10 years and the interest simply doubles to $5,000 — the growth is perfectly linear, a straight line rather than the upward curve you get with compounding.

Simple vs compound interest

The difference is small over short periods but widens sharply over long ones. With the same $10,000 at 5% for 5 years, compound interest grows the balance to about $12,763 — roughly $263 more than simple interest, because each year's interest itself starts earning. Stretch that to 30 years and the gap balloons into the thousands. As a saver you want compound interest working for you; as a borrower, simple interest is usually the friendlier deal. To see the other side of the coin, try our compound interest calculator with the same numbers and compare the totals.

When simple interest is used

Simple interest shows up in plenty of real products. Many car loans and short-term personal loans charge it on the outstanding principal. Most bonds pay simple (non-reinvested) coupon interest. Some mortgages, certain student loans, and short bridging finance also use it. Because the math is transparent and easy to verify, simple interest is common wherever lenders want borrowers to see exactly what they owe — and wherever the term is short enough that compounding would make little practical difference.