Simple Interest Calculator
Calculate simple interest on investments and loans with our comprehensive calculator featuring mathematical formulas and professional analysis
Understand the difference between simple and compound interest, analyze investment returns, and make informed financial decisions
How to Use the Simple Interest Calculator
Our Simple Interest Calculator helps you determine the returns on your investment or the cost of borrowing based on a fixed principal amount and interest rate. Follow these simple steps:
- 1Principal Amount ($): Enter your initial investment amount or loan principal
- 2Annual Interest Rate (%): Input the expected yearly return rate or loan interest rate
- 3Time Period: Select the investment duration or loan term in years
- 4Calculate: Click 'Calculate' to view your simple interest projection and total amount
calculation parameters
Breakdown
Results
Balance Accumulation Graph
Schedule
| Year | Interest | Balance |
|---|---|---|
| 1 | $0.00 | $2,000.00 |
| 2 | $0.00 | $2,000.00 |
| 3 | $0.00 | $2,000.00 |
| 4 | $0.00 | $2,000.00 |
| 5 | $0.00 | $2,000.00 |
| 6 | $0.00 | $2,000.00 |
| 7 | $0.00 | $2,000.00 |
| 8 | $0.00 | $2,000.00 |
| 9 | $0.00 | $2,000.00 |
| 10 | $0.00 | $2,000.00 |
What is Simple Interest?
Interest is the cost you pay to borrow money or the compensation you receive for lending money. You might pay interest on an auto loan or credit card, or receive interest on cash deposits in interest-bearing accounts, like savings accounts or certificates of deposit (CDs).
Simple interest is interest that is only calculated on the initial sum (the "principal") borrowed or deposited. Generally, simple interest is set as a fixed percentage for the duration of a loan. No matter how often simple interest is calculated, it only applies to the original principal amount.
Financial Instruments Using Simple Interest
For Borrowers
- Short-term loans
- Some auto loans
- Basic personal loans
For Investors
- Government bonds
- Corporate bonds
- Some certificates of deposit
Simple vs. Compound Interest
Unlike compound interest, simple interest does not earn "interest on interest." This makes it less favorable for long-term investments but more predictable for loans. Most savings accounts and investment vehicles use compound interest for better growth potential.
Simple Interest Formula
The simple interest calculation uses a straightforward formula that applies the interest rate only to the original principal amount.
Simple Interest Formula
The basic formula for calculating simple interest:
Total Amount Formula
To find the total amount including principal and interest:
Where:
- = Simple Interest earned
- = Principal (initial amount)
- = Annual interest rate (decimal)
- = Time period in years
- = Total amount (Principal + Interest)
Example Calculation
Investment Scenario:
• Principal (P) = $10,000
• Annual interest rate (r) = 5% = 0.05
• Time period (t) = 3 years
Calculation Steps:
Results Summary:
Principal
$10,000
Interest Earned
$1,500
Total Amount
$11,500
Investment Tips & Applications
When to Use Simple Interest
- • Short-term investments (less than 1 year)
- • Bond interest calculations
- • Quick loan cost estimates
- • Basic financial planning scenarios
Limitations to Consider
- • Does not account for compound growth
- • Less accurate for long-term projections
- • May underestimate actual returns
- • Inflation impact not considered
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Sample calculation
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💡 Pro Tip
Simple interest is great for understanding basic financial concepts, but consider compound interest calculators for long-term investment planning.