Simple Interest Calculator
Simple interest is a straightforward method of calculating interest where it is applied only to the original principal amount. Unlike compound interest, the interest earned does not accumulate or earn additional interest, making it easier to calculate and predict.
Simple interest is commonly used in short-term loans, auto loans, and some types of bonds. It provides a transparent way to understand the cost of borrowing or the return on an investment. Knowing how to calculate simple interest helps you compare financial products and make better borrowing decisions.
How it works
I = P × r × t, where I is the interest earned, P is the principal amount, r is the annual interest rate (as a decimal), and t is the time in years. The total amount is A = P + I.
Use cases
- Calculating interest on short-term personal loans
- Understanding returns on certificates of deposit (CDs)
- Estimating auto loan interest payments
- Comparing simple vs. compound interest on different products