Enter principal amount, annual interest rate, and time period in years to calculate simple interest earnings and final total balance.
How to use this calculator
Enter the starting principal loan or investment amount.
Enter the annual simple interest rate percentage.
Enter the duration in years (or decimal fractions of years).
Read your total simple interest earned, total accumulated balance, and comparison against monthly compound interest.
Formula & method
Simple Interest Equation (I = P × r × t)
Interest I = Principal P × Rate r × Time t · Total Balance A = P + I
P = initial principal, r = annual rate decimal, t = time in years.
Example
$10,000 principal @ 5% annual simple interest for 3 years → Interest: $10,000 × 0.05 × 3 = $1,500. Final Balance: $11,500 ($41.67/mo).
Key insights
Simple interest calculates returns strictly on the initial principal balance without compounding earnings over time.
Simple interest is standard for short-term personal loans, car loans, and short-term debt instruments.
Over multi-year horizons, compound interest yields exponentially higher returns than simple interest.
The simple interest formula I = P × r × t is linear: doubling the time or rate exactly doubles the interest earned.
How to interpret your result
Total Simple Interest Earned
The linear interest accumulated over the entire holding period.
Final Total Balance
The combined sum of the initial principal investment plus accumulated simple interest.
Compound Interest Difference
Shows the extra yield you would earn if interest compounded monthly instead of linearly.
Frequently asked questions
What is the difference between simple interest and compound interest?
Simple interest calculates returns only on the original principal. Compound interest calculates returns on both the principal and previously accumulated interest.
What is the simple interest formula?
The simple interest formula is I = P × r × t, where I is interest, P is principal, r is annual interest rate (in decimal), and t is time in years.
When is simple interest commonly used?
Simple interest is commonly used for auto loans, short-term personal loans, and simple promissory notes.