Simple Interest Calculator
Calculate the interest earned on a principal amount at a fixed annual rate over a given period. Simple interest is calculated on the original principal only — it does not compound.
Notes
Simple Interest Formula
| Symbol | Meaning | Unit |
|---|---|---|
| SI | Simple Interest earned | $ |
| P | Principal (initial amount) | $ |
| R | Annual interest rate | % per year |
| T | Time period | years |
Total Amount
Worked Example
P = $5,000, R = 6% per year, T = 3 years
Simple vs Compound Interest
Simple interest grows linearly — the same amount is earned each period. Compound interest grows exponentially because each period's interest is added to the principal before the next period's interest is calculated.
| Feature | Simple Interest | Compound Interest |
|---|---|---|
| Calculated on | Original principal only | Principal + accumulated interest |
| Growth pattern | Linear | Exponential |
| Formula | SI = P × R × T / 100 | A = P(1 + r/n)^(nt) |
| Common use | Car loans, short-term savings | Mortgages, investments, savings accounts |
- Simple Interest Formula — Full Reference — Variable definitions, derivation, and three worked examples
- How Simple Interest Works — Detailed Notes — Step-by-step guide with comparisons and applications
Frequently Asked Questions
What is simple interest?
Simple interest is interest calculated only on the original principal, not on accumulated interest. The same amount of interest is earned each year, making growth linear.
How do I calculate simple interest for months instead of years?
Convert months to a decimal year fraction: T = months ÷ 12. For example, 6 months = 0.5 years. Then apply SI = (P × R × 0.5) / 100.
What is the difference between simple and compound interest?
Simple interest is calculated on the principal only. Compound interest is calculated on the principal plus previously accumulated interest, causing exponential growth over time.
Can I calculate the principal if I know the interest earned?
Yes. Rearrange the formula: P = (SI × 100) / (R × T). If you earned $300 interest at 5% per year over 2 years: P = (300 × 100) / (5 × 2) = $3,000.