What is simple interest?

Simple interest is calculated only on the original principal, using I = P·r·t. It does not earn interest on previously earned interest, which is what makes it 'simple' compared with compound interest.

How is simple interest different from compound interest?

Simple interest grows linearly — the same amount each period. Compound interest grows faster because each period's interest is added to the balance and itself earns interest. Over long periods the difference is large.

When is simple interest used?

It is common for short-term loans, some car loans, and certain bonds and Treasury instruments. Most savings accounts and mortgages use compound interest instead.

Simple Interest Calculator

Free simple interest calculator. Enter a principal, annual rate and time period to get the interest and the total amount, using I = P·r·t. Unlike compound interest, simple interest accrues only on the original principal.

Calculate interest earned or owed using the simple interest formula I = P·r·t.

I = P \cdot r \cdot t, A = P + I

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