Simple Interest Calculator
This simple interest calculator works out how much interest a sum of money earns over time and what the final amount will be. Enter your initial principal, the annual interest rate, and the length of the investment or loan in years or months, and it instantly returns the interest generated and the total you will have at the end. Simple interest is the easiest way to price short-term loans, fixed deposits, and many everyday financial agreements, because it always applies to the original capital only.
Interest earned
Final amount
Simple interest is calculated only on the initial principal and does not accrue interest on interest already earned. The rate is treated as annual and the time is converted to years for the calculation.
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How it works
The calculator uses the classic simple interest formula I = P·r·t, where P is the principal (the initial capital), r is the annual interest rate expressed as a decimal, and t is the time in years. If you enter the time in months, it is divided by twelve before the multiplication. The interest earned is simply P·r·t, and the final amount is the principal plus that interest: A = P·(1 + r·t). Unlike compound interest, which adds each period's interest back to the balance so that future interest is earned on interest, simple interest is always computed on the original principal, so the interest grows in a straight line rather than exponentially.
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Preguntas frecuentes
- What is simple interest?
- Simple interest is interest calculated only on the original amount of money, called the principal. Whatever interest is earned does not itself earn further interest. It is commonly used for short-term loans, car financing, and some fixed deposits, and it makes the total cost or return very easy to predict.
- What is the difference between simple and compound interest?
- With simple interest, the interest is always calculated on the original principal, so it grows in a straight line. With compound interest, each period's interest is added to the balance and the next period's interest is calculated on that larger balance, so the money grows faster and faster. Over long periods, compound interest produces much larger totals than simple interest for the same rate.
- What is the simple interest formula?
- The formula is I = P·r·t, where I is the interest, P is the principal, r is the annual interest rate as a decimal (for example 5% = 0.05), and t is the time in years. The final amount is A = P + I = P·(1 + r·t). If the time is given in months, divide it by twelve to get the value of t in years.
- Can you give an example?
- Suppose you invest 10,000 at an annual rate of 6% for 3 years. The interest is 10,000 × 0.06 × 3 = 1,800, so the final amount is 10,000 + 1,800 = 11,800. If instead the term were 8 months, t would be 8/12 ≈ 0.667 years and the interest would be 10,000 × 0.06 × 0.667 = 400.
- How do I convert months to years for the calculation?
- Divide the number of months by twelve. For instance, 6 months is 6/12 = 0.5 years and 18 months is 18/12 = 1.5 years. This calculator does the conversion automatically when you choose months as the time unit, so you can enter the term in whichever unit is more convenient.