Simple Interest Calculator
Simple interest is charged only on the original principal, never on interest already earned. It is used for many short-term loans and some bonds.
Enter your figures below. Results update as you type.
Interest$750.00
- Principal 87%
- Interest 13%
- Principal
- $5,000.00
- Total (principal + interest)
- $5,750.00
How the Simple Interest calculation works
I = P x r x t
P is the principal, r the annual rate as a decimal and t the time in years. $5,000 at 5% for 3 years earns 5,000 x 0.05 x 3 = $750.
Frequently asked questions
When is simple interest used?
Car loans and many personal loans calculate interest daily on the outstanding principal, which is a form of simple interest. Savings accounts and credit cards use compound interest.
How do I calculate simple interest?
Multiply the principal by the yearly rate and the number of years: I = P x r x t. $5,000 at 6% for 3 years earns $900 in interest, for a total of $5,900.
What is the difference between simple and compound interest?
Simple interest is charged only on the original amount. Compound interest is charged on the original amount plus the interest already added, so it grows faster. $5,000 at 6% for 3 years earns $900 with simple interest and about $955 compounded yearly.
Are car loans simple interest?
Most US auto loans are. Interest builds up daily on the balance you still owe, so paying early, or paying extra, reduces the total interest.
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