A simple interest calculator computes interest earned or owed on a principal amount at a flat rate without any compounding.
About this calculator
A simple interest calculator computes interest earned or owed on a principal amount at a flat rate without any compounding. Simple interest is calculated as SI = P × R × T / 100, where P is principal, R is annual rate, and T is time in years.
Simple interest is used in short-term personal loans, some car loans, and as a quick comparison tool to understand borrowing or investment costs.
Common uses
- Calculate interest on a short-term personal loan
- Compare simple vs compound interest for the same investment
- Determine how much you owe on a simple-interest loan
- Quick interest estimates for informal lending arrangements
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is always calculated on the original principal: SI = P × r × t. Compound interest is calculated on the growing balance (principal + accumulated interest). Over long periods, compound interest grows clearly faster than simple interest.
When is simple interest used in real life?
Simple interest is used in short-term personal loans, US auto loans (actuarial method), bonds between coupon payment dates, informal loans between friends or family, and as a benchmark for comparing loan costs.