Simple interest calculator
Calculate interest without compounding.
- Formula and assumptions shown
- Table and CSV export
- Runs in your browser
How it works
Simple interest applies the rate to the original principal for each period. Unlike compound interest, previously earned interest does not become part of the balance used for the next period.
Interest = principal × annual rate × years; final amount = principal + interest.
Use this model for a clear baseline or for agreements that explicitly state simple interest. Compare it with a compound model when interest is added back to the balance.
Assumptions
- The entered annual rate stays constant for the full term.
- Time is entered in whole years.
- Interest is calculated only on the original principal; there is no compounding or payment schedule.
- Taxes, fees, penalties, and contract-specific daily interest conventions are excluded.
Worked example
$1,000 for two years
At 5% simple interest, interest is $1,000 × 0.05 × 2 = $100, so the estimated final amount is $1,100.
Step by step
- Write the rate as a decimal. 5% ÷ 100 = 0.05. The term is 2 whole years and the principal is $1,000.
- Work out one year of interest. $1,000 × 0.05 = $50. Under simple interest this amount is the same every year, because it is always figured on the original $1,000.
- Multiply by the number of years. $50 × 2 = $100 of interest, the same as $1,000 × 0.05 × 2.
- Add the principal. $1,000 + $100 = $1,100 total value. The year-by-year table shows a balance of $1,050 after year 1 and $1,100 after year 2.
- Compare with annual compounding. If year 1’s interest were added to the balance, year 2 would earn 5% of $1,050 = $52.50, for a total of $1,102.50. The $2.50 gap is interest on interest, which simple interest leaves out.
How to read your result
Total value is the principal plus all interest at the end of the term. Interest earned is principal × rate × years, and Principal repeats the amount you entered. The table lists the balance and cumulative interest at the end of each year.
Because the same interest is added every year, the balance line on the chart is straight. A compounding balance curves upward instead, and the gap grows with time: $1,000 at 5% for 10 years is $1,500 with simple interest and $1,628.89 with annual compounding.
The model uses whole years and one constant rate. It leaves out fees, taxes, and the day-count rules some contracts use, such as charging interest by the day. Some loans described as simple interest charge interest on the remaining balance as it is repaid; for a loan with regular payments, the loan payment calculator is the closer model.
What changes the result most
- Time
- Interest grows in a straight line with time. Doubling the term from 2 to 4 years doubles the interest from $100 to $200, and 10 years gives $500.
- Rate
- Each percentage point adds $10 a year on $1,000. At 6% for 2 years the total is $1,120 instead of $1,100.
- Principal
- Interest is proportional to the principal, so $2,000 at 5% for 2 years earns $200, twice the example.
Questions
How is simple interest different from compound interest?
Simple interest uses the original principal throughout. Compound interest also earns interest on prior interest, so it usually grows faster over time.
Can I enter months or days?
This model accepts whole years. Convert another term to years only if that conversion fits the agreement you are modeling.
Does this include fees?
No. Add fees separately or use a borrowing-cost calculator when you need an effective cost that includes fees.
What is the simple interest formula?
I = P × r × t: principal times the annual rate as a decimal times the number of years. The total amount is A = P × (1 + r × t). For $1,000 at 5% for 2 years, A = $1,000 × (1 + 0.05 × 2) = $1,100.
How does simple interest work?
Interest is charged or earned only on the original principal. Interest from earlier periods is not added to the base, so each year produces the same dollar amount of interest. That makes the total easy to check by hand, and it is lower than a compounding balance at the same rate over the same term.
More in Savings & investing
Sources
These references explain the concepts behind the calculation. They do not endorse this site. Estimates leave out any cost or condition you did not enter.