The Simple Interest Calculator computes interest earned or owed on a principal amount using a straightforward rate — without compounding. It’s commonly used for short-term loans, bonds, and savings accounts that pay interest only on the original deposit.

How to Use This Calculator

1. Enter the Principal — your starting loan or investment amount.
2. Enter the Annual Interest Rate as a percentage.
3. Enter the Time Period in years (you can use decimals, e.g., 0.5 for 6 months).
4. Click Calculate.

Simple Interest vs. Compound Interest

With simple interest, you earn interest only on the original principal — it never compounds. With compound interest, you earn interest on both the principal and the accumulated interest from previous periods.

For short time periods (under a year), the difference is negligible. For long periods, compound interest grows dramatically faster. A $1,000 investment at 5% simple interest for 10 years earns $500. At 5% compound interest (annually), it earns $629 — 26% more.

When Is Simple Interest Used?

• Car loans and some personal loans that are “pre-computed”
• US Treasury bills and short-term government bonds
• Payday loans (which use daily simple interest rates that are very high)
• Informal loans between friends or family

Frequently Asked Questions

How do I convert monthly rate to annual rate?

Multiply the monthly rate by 12. For example, a 1.5% monthly rate = 18% annual simple interest rate.

Does simple interest apply to credit cards?

Credit cards technically use daily periodic rates, but because interest is calculated on a balance that includes prior interest, they effectively compound. Credit card interest is not simple interest.