Simple Interest Calculator
Enter the principal, the annual interest rate and the time to calculate the simple interest earned.
- Interest earned
- 150
- Total amount
- 1,150
How simple interest is calculated
Unlike compound interest, simple interest is always calculated on the original principal, without accumulating interest on previously earned interest.
interest = principal × interest rate ÷ 100 × time
It's used in some personal loans, short-term treasury bills, and certain simple savings products. Over the long run it produces lower returns than compound interest, because the interest earned isn't reinvested.
total amount = principal + interest
Worked example
A principal of €1000 at 5% annual interest over 3 years generates interest of 1000 × 5 ÷ 100 × 3 = €150. The total amount is 1000 + 150 = €1150. With compound interest at the same rate, the result would be slightly higher (€1157.63), because each year's interest would also earn interest.
Frequently asked questions
- How is this different from compound interest?
- Simple interest is calculated only on the initial principal in each period, while compound interest also earns interest on accumulated interest.
- Can I use a time in months instead of years?
- Enter the time in years; if you have months, divide the number of months by 12 to convert them to years.
- Does this work for loans?
- It can give you a rough idea of the total interest on a simple-interest loan, but many loans use compound interest or amortization, so check your lender's exact terms.
- Which financial products use simple interest?
- Some short-term personal loans, treasury bills, and promissory notes use it, though most savings accounts, deposits, and long-term mortgages use compound interest.