Simple Interest Calculator

How it works

Simple interest grows in a straight line. The formula is I = P x r x t, where P is the principal, r is the annual rate as a decimal and t is the time in years. Because interest is never added to the balance during the term, each year earns exactly the same amount of interest: principal times rate. That makes simple interest easy to predict, and it is still used for many car loans, short-term loans, some bonds and late-payment penalties. It differs from compound interest, where interest is periodically added to the balance and then itself earns interest, producing exponential growth. Over short periods the difference is small; over decades it is enormous. As a borrower, simple interest is usually in your favor compared with compounding at the same rate. As a saver, compounding works for you. If your product quotes a monthly rate, multiply it by 12 to get the annual rate for this calculator, and if your term is in months, divide by 12 to express it in years, for example 18 months is 1.5 years.