Simple Interest Calculator
Calculate simple interest using the straightforward P×R×T formula with our free calculator. Simple interest is calculated only on the original principal, without compounding—making it common for auto loans, personal loans, and some bonds where interest is paid out rather than reinvested.
Simple vs Compound Interest Comparison
| $10,000 at 5% | 1 Year | 5 Years | 10 Years | 20 Years | Simple Interest$10,500$12,500$15,000$20,000 Compound (Annual)$10,500$12,763$16,289$26,533 | Difference | $0 | +$263 | +$1,289 | +$6,533 |
The Simple Interest Formula
I = P × R × T (Interest = Principal × Rate × Time)
Where:
- I = Interest earned
- P = Principal (starting amount)
- R = Annual interest rate (as decimal)
- T = Time in years
Simple Interest Calculator
``javascript
function calculateSimpleInterest(principal, annualRate, years) {
const rate = annualRate / 100;
const interest = principal * rate * years;
const finalAmount = principal + interest;
// Monthly payment for a simple interest loan
const totalPayments = years * 12;
const monthlyPayment = finalAmount / totalPayments;
return {
interest: interest.toFixed(2),
finalAmount: finalAmount.toFixed(2),
monthlyPayment: monthlyPayment.toFixed(2),
averageAnnualInterest: (interest / years).toFixed(2)
};
}
// Calculate remaining balance at any point
function simpleInterestBalance(principal, rate, totalYears, yearsElapsed) {
const totalOwed = principal * (1 + (rate / 100) * totalYears);
const monthlyPayment = totalOwed / (totalYears * 12);
const paidSoFar = monthlyPayment * yearsElapsed * 12;
return (totalOwed - paidSoFar).toFixed(2);
}
``
Where Simple Interest Is Used
Simple interest is common in auto loans, personal loans, and student loans. It's also used for short-term borrowing, treasury bills, and situations where interest is paid out periodically rather than reinvested. Understanding simple interest helps you compare loan costs and recognize when compound interest would work against you (as a borrower) or for you (as an investor).