How to Calculate Simple Interest (2026)

Simple interest is the most straightforward way to calculate the cost of borrowing or the return on lending. Unlike compound interest, it is computed only on the original principal — not on accumulated interest. This makes it easy to understand and common in short-term loans, car financing, savings bonds, and installment agreements. Use the Simple Interest Calculator to get the result instantly without any arithmetic.

The Simple Interest Formula

Simple interest is calculated as: I = P × r × t, where P is the principal (the starting amount), r is the annual interest rate as a decimal, and t is the time in years. The total amount owed or received at the end of the period is A = P + I.

Example: you borrow $5,000 at 6% per year for 3 years. I = 5,000 × 0.06 × 3 = $900. Total repayment = $5,900. The interest does not grow over time because it is always calculated on the original $5,000 — not on any accumulated interest.

Simple Interest at Different Rates and Terms

The table below shows how interest accumulates on a $10,000 principal at varying rates and durations. All figures assume annual compounding is not applied — interest is flat on the original principal.

Simple Interest vs. Compound Interest

With simple interest, the interest charge is the same every year regardless of how long the loan runs. With compound interest, unpaid interest is added to the principal at each period, so future interest is calculated on a larger base — meaning the total cost grows faster over time. For short terms (under one year), the difference is negligible. For multi-year loans, compound interest can cost significantly more. When evaluating any loan, confirm whether the stated rate is simple or compound before comparing offers.

Use the Simple Interest Calculator to do this instantly.