Simple Interest Calculator
Compute simple interest and total amount for loans or deposits that do not compound.
How simple interest works
Simple interest is charged on the original principal only — it never earns interest on interest. That makes it easy to work out in your head and it is still the basis for many short-term loans, car finance agreements, fixed deposits and informal lending arrangements. This simple interest calculator returns the interest, the final amount and the total growth as a percentage, so you can see at a glance what a deal actually costs.
How to use the Simple Interest Calculator
- Enter the Principal (P) — the amount borrowed or deposited.
- Enter the Annual Rate (r%).
- Enter Time (years); for months, divide by 12 (6 months = 0.5).
- Read the interest, the final amount, and the growth percentage.
Formula and a worked example
SI = P × r × t · A = P + SI
r is the annual rate as a decimal and t is time in years. Because nothing compounds, the interest is the same in year one as in year ten — the total simply rises in a straight line.
Worked example
Borrow 50,000 at 9% for 3 years. SI = 50,000 × 0.09 × 3 = 13,500, so you repay 63,500. Under yearly compounding the same loan would cost 14,754 — about 1,254 more.
Frequently asked questions
What is the formula for simple interest?
SI = P × r × t, where P is the principal, r the annual rate as a decimal and t the time in years. Add SI to P to get the total repayable.
How do I calculate simple interest for months?
Convert months to years by dividing by 12. Nine months is 0.75, so 20,000 at 7% for 9 months is 20,000 × 0.07 × 0.75 = 1,050.
Which is cheaper for a borrower, simple or compound interest?
Simple interest, always — and the gap widens with time. Over one year at the same rate they are nearly identical; over twenty years the difference is large.
Where is simple interest actually used?
Short-term personal loans, many car loans, some fixed deposits, treasury bills, and most informal lending. Mortgages and savings accounts almost always compound.
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