Simple Interest Calculator
Calculate simple interest earned or owed using the formula I = P × R × T for loans and investments.
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How to Use This Calculator
- Enter the principal amount (initial sum of money)
- Input the annual interest rate as a percentage
- Specify the time period in years
- Click 'Calculate' to see the simple interest and total amount
- Review the results showing interest earned and final total
- Compare with compound interest to see the difference
Formula
SI = P × r × t, where SI = simple interest, P = principal amount, r = annual interest rate (decimal), t = time in years. Total Amount = P + SI
Frequently Asked Questions
What is simple interest?▼
Simple interest is interest calculated only on the principal amount (initial sum) throughout the entire loan or investment period. Unlike compound interest, it does not include interest on previously earned interest.
When is simple interest used?▼
Simple interest is commonly used for short-term loans, certain bonds, and some savings accounts. It's simpler to calculate and is often used for car loans, personal loans, and mortgages in their basic form.
How do I calculate simple interest?▼
Simple interest is calculated using the formula: SI = P × r × t, where P is the principal amount, r is the annual interest rate (as a decimal), and t is the time period in years.
Is simple interest better than compound interest?▼
For borrowers, simple interest is better as you pay less total interest. For investors, compound interest is better as your money grows faster. Simple interest grows linearly while compound interest grows exponentially.