Simple Interest Calculator
Simple Interest:
Total Amount:
Effective Rate:
What is Simple Interest Calculator?
A Simple Interest Calculator is a financial tool that calculates the interest earned or paid on a principal amount over a specific time period at a fixed interest rate. Unlike compound interest, simple interest is calculated only on the original principal amount.
The calculator uses the formula: I = P × R × T, where I is the interest, P is the principal amount, R is the annual interest rate (as a percentage), and T is the time period in years.
How It Works
Enter Principal
Input the initial amount of money (P)
Set Interest Rate
Enter the annual interest rate (R) as a percentage
Specify Time
Enter the time period (T) in years, months, or days
Simple Interest Formula:
Common Examples
Personal Loan
Principal: $10,000
Interest Rate: 8% per year
Time: 3 years
Simple Interest: $2,400
Total Amount: $12,400
Savings Account
Principal: $5,000
Interest Rate: 3% per year
Time: 2 years
Simple Interest: $300
Total Amount: $5,300
Short-term Investment
Principal: $25,000
Interest Rate: 6% per year
Time: 6 months
Simple Interest: $750
Total Amount: $25,750
Business Loan
Principal: $50,000
Interest Rate: 12% per year
Time: 18 months
Simple Interest: $9,000
Total Amount: $59,000
Calculation Table
| Principal ($) | Rate (%) | Time (Years) | Interest ($) | Total ($) |
|---|---|---|---|---|
| 1,000 | 5 | 1 | 50 | 1,050 |
| 5,000 | 4 | 2 | 400 | 5,400 |
| 10,000 | 6 | 3 | 1,800 | 11,800 |
| 15,000 | 8 | 1.5 | 1,800 | 16,800 |
| 20,000 | 7 | 4 | 5,600 | 25,600 |
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and previously earned interest. Simple interest grows linearly, compound interest grows exponentially.
How do I calculate simple interest manually?
Use the formula I = P × R × T. Multiply the principal amount by the interest rate (as a decimal) and the time period in years. For example: $1,000 × 0.05 × 2 = $100.
Can I use different time units?
Yes, this calculator supports years, months, and days. The calculator automatically converts months and days to years for accurate calculations (1 year = 12 months = 365 days).
When is simple interest used in real life?
Simple interest is commonly used for short-term loans, some bonds, promissory notes, and certain savings accounts. It's also used in legal settlements and some business transactions.
What if I want to find the principal or rate?
You can rearrange the formula: P = I ÷ (R × T) to find principal, or R = I ÷ (P × T) to find the rate. Enter the known values and solve for the unknown variable.
Is this calculator accurate for financial planning?
Yes, this calculator provides accurate results for simple interest calculations. However, for complex financial planning, consider factors like inflation, taxes, and compound interest which may be more relevant.