Simple Interest Calculator
Simple interest is calculated solely on the original principal amount without compounding. It is frequently utilized in short-term promissory notes, car loans, and informal lending agreements.
Calculated Result
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Notice: Informational estimate only. Not financial advice.
Formula & Mechanics
Interest = Principal × Rate × Time
Multiply the starting principal by the annual interest rate (as a decimal) and the duration in years.
Worked Step-by-Step Example
Scenario: $5,000 invested at 4% annual simple interest for 3 years.
- Principal P = 5000
- Rate r = 0.04
- Time t = 3
- Interest = 5000 × 0.04 × 3 = $600
Total interest accrued is $600. Ending balance is $5,600.
Frequently Asked Questions
What is the main difference between simple and compound interest?
Simple interest only earns on the initial deposit. Compound interest earns interest on previous interest, accumulating faster over time.
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