Simple Interest Calculator

Simple interest is charged on the original principal for the whole period — earlier interest never earns interest of its own. That makes it predictable and always cheaper for a borrower than compound interest over the same rate and term. The compound equivalent row shows how much more the same rate would produce if interest were reinvested annually.

Why this one is different

The compound figure for the same principal, rate and term is worked out alongside the simple one, so the gap the words describe is a number you can read. Interest per year is given as well, which is the line that matters when a short-term facility quotes an annual rate but runs for months.

How it works

Multiply the principal by the annual rate to get one year of interest, then multiply by the number of years. Because the base never changes, the interest accrues in a straight line rather than a curve — doubling the term exactly doubles the interest.

How to use this calculator

Choose your currency.
Enter the principal — the amount borrowed or invested.
Set the annual rate.
Enter the time in years; use decimals for part years (0.5 = six months).
Compare the simple and compound figures to see the cost of reinvestment.

Formula

I = P × r × t A = P + I

I = interest, P = principal, r = annual rate as a decimal, t = time in years, A = final amount.

Example calculation

£5,000 at 4.5% simple interest for 3 years:

I = 5,000 × 0.045 × 3
Interest = £675
Final amount = £5,675

The same rate compounded annually would produce about £706 — roughly £31 more.

Frequently asked questions

When is simple interest actually used?＋

Short-term personal loans, some car finance, many bonds paying a fixed coupon, and most late-payment charges on invoices. Anything running for less than a year is often quoted this way because compounding barely differs.

How do I enter months instead of years?＋

Divide the months by twelve. Six months is 0.5, eighteen months is 1.5, and ninety days is roughly 0.25.

Why is compound interest higher?＋

Compound interest pays interest on previously earned interest, so the base grows every period. Over short spans the difference is small; over decades it dominates.

Where is simple interest actually used?＋

Short-term lending, some personal and car loans, many bonds paying periodic coupons, and most late-payment terms on invoices. It also appears in exam questions far more often than in modern savings products, where compounding is the norm.

How much less is it than compound interest?＋

Over one period, nothing — they are identical. The gap opens with time and grows fastest at higher rates. Over a year or two the difference is often small enough to ignore; over a decade it becomes the dominant part of the answer.

Does the day-count convention matter?＋

It can. Different agreements count a year as 360 or 365 days, and interest on a short period differs accordingly. On small sums the effect is pennies; on large balances over short periods it is worth checking which convention your agreement specifies.