Simple Interest Calculator
Enter a principal, annual rate, and term to calculate simple interest, where interest is earned only on the original principal, not on previously earned interest.
Simple interest is calculated on the original principal only, every year earns the same dollar amount of interest. Compound interest, used by most real savings accounts and loans, calculates interest on the growing balance instead, which earns more over time. Use the Compound Interest Calculator if that's what you're actually working with, simple interest mostly shows up in short-term loans and some bonds.
Frequently asked questions
What's the actual difference from compound interest?+
Simple interest is calculated on the original principal only, every year earns the same dollar amount. Compound interest calculates interest on the growing balance (principal plus previously earned interest), which earns more over time. Most real savings accounts and loans compound; simple interest mostly shows up in short-term loans and certain bonds.
When would I actually encounter simple interest in practice?+
Short-term personal loans, some auto loans, and certain bonds calculate interest this way. It's less common for savings products, which almost always compound to the saver's benefit.
Is simple interest better or worse for a borrower than compound?+
Better, for the same stated rate, since you never pay interest on interest. For a saver, it's the opposite, compound interest grows your balance faster than simple interest at the same rate.