Simple Interest Calculator
Calculate simple interest and the final balance on a principal at a fixed rate over time, and see how it compares with compound interest.
Cómo usar esta calculadora
- 1Enter the principal — the amount borrowed or invested.
- 2Enter the annual interest rate.
- 3Enter the time, in years, months, or days.
- 4Read the interest and final balance, and compare against the compound figure.
Cómo funciona
Simple interest
interest = principal × rate × time I = P × r × t final balance = P × (1 + r × t) rate as a decimal, time in years
Simple interest is the most basic way to charge for the use of money: a fixed percentage of the original principal for each period, and nothing on the interest itself. Because the base never changes, the interest is the same every year and the balance grows in a straight line. This makes it easy to calculate and predictable, which is why it appears in short-term loans, some bonds, and many car and personal loans, even though savings and mortgages almost always compound instead.
Ejemplo resuelto
$10,000 at 5% simple interest for 3 years earns 10,000 × 0.05 × 3 = $1,500, for a final balance of $11,500. The same money compounded annually at 5% would grow to about $11,576 — $76 more, a gap that widens sharply over longer terms.
Simple Interest Calculator: la guía completa
Simple versus compound interest
The difference between simple and compound interest is whether interest earns interest. Simple interest is calculated only on the original principal, so a $10,000 deposit at 5% earns exactly $500 every year, forever. Compound interest is calculated on the principal plus all previously accrued interest, so each year's base is a little larger and the growth accelerates.
Over short periods the two are close, but the gap widens dramatically with time — this is the engine behind long-term investing. For a saver, compound is far better; for a borrower, simple is far better. Knowing which one a product uses is essential, and the comparison figure above shows exactly what the choice is worth at your rate and term.
Where simple interest is actually used
Despite compounding's dominance in savings and mortgages, simple interest is common in specific places. Many auto loans and personal loans are simple-interest, calculated on the outstanding balance each day, which rewards paying early. Some bonds pay simple interest as fixed coupons. Short-term promissory notes and certain government-issued securities use it too.
For a borrower, a genuine simple-interest loan is favourable, because paying ahead of schedule reduces the principal that interest is charged on. The catch is that not every loan advertised with a 'flat rate' is truly simple interest in your favour — some flat-rate loans charge interest on the original amount for the whole term even as you pay it down, which is worse than a normal amortising loan. Read the terms.
Reading the formula both ways
The simple-interest formula, I = P × r × t, is easy to rearrange for whatever you need. Knowing the interest and principal, you can solve for the rate (r = I ÷ (P × t)) or the time. This makes it a quick tool for checking a loan quote: if a lender says you'll pay $1,500 to borrow $10,000 for three years, that implies a 5% simple rate, and you can compare it against alternatives.
The one discipline the formula demands is consistent units. The rate and time must match — an annual rate needs the time in years, so a six-month term is 0.5 years, not 6. This calculator handles months and days for you by converting them to years first, which is where the most common arithmetic mistakes otherwise creep in.
Preguntas frecuentes
What is the simple interest formula?
Interest = principal × rate × time, or I = P × r × t, with the rate as a decimal and time in years. The final balance is P × (1 + r × t). $10,000 at 5% for 3 years earns $1,500.
What is the difference between simple and compound interest?
Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest is charged on the principal plus accrued interest, so it accelerates. Compound favours savers; simple favours borrowers. The gap widens with time.
Which loans use simple interest?
Many auto and personal loans, some bonds, and short-term notes use simple interest, often calculated daily on the outstanding balance — which rewards early payment. Mortgages and savings accounts almost always compound instead. Always check which a product uses.
Is simple interest better for me?
It depends on which side you're on. As a borrower, a true simple-interest loan is better because paying early reduces the interest base. As a saver or investor, compound interest is better because your returns earn returns. Match the product to your position.