Calculate interest earned or paid using the simple interest formula instantly.
Simple interest is calculated using the formula: I = P × R × T, where P is the principal, R is the annual interest rate (as a decimal), and T is the time in years. Unlike compound interest, simple interest is calculated only on the original principal — not on accumulated interest.
Simple interest is common in short-term loans, auto loans, some personal loans, and US Treasury bills. Most savings accounts and mortgages use compound interest, which grows faster for savers but costs more for borrowers over time.
On a $10,000 loan at 5% for 3 years: simple interest = $1,500 total. Compound interest (monthly) = ~$1,614 total. The difference grows significantly over longer time periods and higher rates, which is why understanding which type applies to your loan or account matters.