Simple Interest Calculator

Our Simple Interest Calculator determines both the accrued interest and the final balance using the simple‑interest equation. Switch between the tabs to compute the various variables of that formula. In practice, the majority of interest computations use compound interest. To work out compound interest, try the Interest Calculator.

Schedule

Year	Interest	Balance
1	$600.00	$20,600.00
2	$600.00	$21,200.00
3	$600.00	$21,800.00
4	$600.00	$22,400.00
5	$600.00	$23,000.00
6	$600.00	$23,600.00
7	$600.00	$24,200.00
8	$600.00	$24,800.00
9	$600.00	$25,400.00
10	$600.00	$26,000.00

Related

Interest Calculator | Compound Interest Calculator

What is Simple Interest?

Interest represents the price of borrowing funds or the reward for lending them. You may incur interest on a car loan or credit‑card balance, while you can earn interest on cash placed in interest‑bearing accounts such as savings accounts or certificates of deposit (CDs).

Simple interest is computed solely on the original amount (the “principal”) that is borrowed or deposited. Typically, it is expressed as a constant rate that applies for the whole loan term. Regardless of how frequently you compute it, the charge is always based on that initial principal, meaning earlier interest does not influence later interest calculations.

Simple Interest Formula

The basic simple interest formula looks like this:

Simple Interest = Principal Amount × Interest Rate × Time

Our calculator will compute any of these variables given the other inputs.

Simple Interest Calculated Using Years

You may also see the simple interest formula written as:

I = Prt

In this formula:

• I = Total simple interest
• P = Principal amount or the original balance
• r = Annual interest rate
• t = Loan term in years

The formula lets you adjust the variable “t” to match the exact time span. For example, to find interest for a half‑year, you would set “t” to 0.5.

Simple Interest for Different Frequencies

You may also see the simple interest formula written as:

I = Prn

In this formula:

• I = total interest
• P = Principal amount
• r = interest rate per period
• n = number of periods

Using the same expression you can determine simple interest for various compounding intervals, such as daily or monthly. Say you need monthly interest; you would enter the monthly rate as “r” and multiply it by the number of periods “n”.

Simple Interest Examples

Let's review a quick example of both I=Prt and I=Prn.

I = Prt

Imagine you borrow $10,000 with a 5 % yearly simple‑interest rate and plan to repay it over five years. You’d like to find out the total interest you’ll pay across the life of the loan.

To start, you'd multiply your principal by your annual interest rate, or $10,000 × 0.05 = $500.

Then, you'd multiply this value by the number of years on the loan, or $500 × 5 = $2,500.

With the total interest figure in hand, you can compute the overall repayment amount ($10,000 + $2,500 = $12,500). You can also break it down to see the daily or monthly interest portion.

I = Prn

Alternatively, you can use the simple interest formula I=Prn if you have the interest rate per month.

If you had a monthly rate of 5% and you'd like to calculate the interest for one year, your total interest would be $10,000 × 0.05 × 12 = $6,000. The total loan repayment required would be $10,000 + $6,000 = $16,000.

What Financial Instruments Use Simple Interest?

For borrowers, simple interest is advantageous because the charge applies only to the initial balance. This differs from compound interest, which adds interest on previously earned interest. Simple interest is commonly found on short‑term loans.

Conversely, simple interest is less beneficial for lenders or investors, as assets that generate only simple returns forego the compounding effect and can limit potential earnings.

Nevertheless, certain securities employ simple interest for ease of calculation—such as coupon‑bearing bonds. Some investments also distribute simple‑interest dividends. To reap compounding benefits, those dividends would need to be reinvested as additional principal.

By contrast, most checking and savings accounts, as well as credit cards, operate using compound interest.

Simple Interest Versus Compound Interest

Compound interest represents a distinct way to calculate returns. Unlike simple interest, it generates earnings on the original capital and also on any interest that has already been credited, meaning each compounding period adds interest to both the principal and the accumulated interest.

When the horizon extends, compound interest tends to increase costs for borrowers while boosting gains for investors. This mechanism powers most credit‑card balances and loan products, and many savings accounts apply a compounding schedule as well. Ask your bank how frequently your account compounds to understand its impact.

Compound Interest Formula

The basic formula for compound interest is:

A = P × (1 +

r n

)nt

In this formula:

• A = ending balance
• P = Principal balance
• r = the interest rate (expressed as a decimal)
• n = the number of times interest compounds in a year
• t = time (expressed in years)

Interest may compound on various cycles – the most common are monthly or yearly. The shorter the interval, the larger the overall amount you either pay or receive. For a daily schedule you would use 365 periods per year; for a monthly schedule you would enter 12.

Learn More About Compound Interest

Compound interest calculations can get complex quickly because it requires recalculating the starting balance every compounding period.

For more information on how compound interest works, we recommend visiting our compound interest calculator.

Which is Better for You: Simple or Compound Interest?

For someone who borrows, simple interest is advantageous because the charge stays tied to the original sum, keeping total payments down. In contrast, a saver or investor benefits from compound interest, which can significantly raise the final return on a loan, an investment vehicle, or a regular deposit account.

For a quick example, consider a $10,000 loan at 5% interest repaid over five years.

Applying the numbers above, a $10,000 loan at 5 % simple interest over five years results in a repayment of $12,500 – the principal of $10,000 plus $2,500 in interest.

If the same loan is subjected to monthly compounding, the amount due after five years rises to $12,833.59, comprising the $10,000 principal and $2,833.59 in accrued interest. The gap between simple‑interest and compound‑interest scenarios widens noticeably as time goes on.

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