— Investment
Simple Interest Calculator
Work out simple interest — interest paid only on the original principal — and see at a glance how far it falls behind compound interest over time.
Total amount in 10 years
$15,000
- Interest earned
- $5,000
- With yearly compounding
- $16,288.95
- Compounding would add
- $1,288.95
— Year by year
| Year | Interest | Total interest | Balance | With compounding |
|---|---|---|---|---|
| 1 | $500 | $500 | $10,500 | $10,500 |
| 2 | $500 | $1,000 | $11,000 | $11,025 |
| 3 | $500 | $1,500 | $11,500 | $11,576.25 |
| 4 | $500 | $2,000 | $12,000 | $12,155.06 |
| 5 | $500 | $2,500 | $12,500 | $12,762.82 |
| 6 | $500 | $3,000 | $13,000 | $13,400.96 |
| 7 | $500 | $3,500 | $13,500 | $14,071 |
| 8 | $500 | $4,000 | $14,000 | $14,774.55 |
| 9 | $500 | $4,500 | $14,500 | $15,513.28 |
| 10 | $500 | $5,000 | $15,000 | $16,288.95 |
— Simple vs compound
Download— How it works
Interest = Principal × rate × time; Total = Principal × (1 + rate × time)
What simple interest is
Simple interest is paid only on the original principal — never on the interest already earned. The amount added is the same every year, so the balance grows in a straight line rather than curving upward. That makes it easy to work out in your head: interest is just principal × rate × time.
Worked example — $10,000 at 5% simple for 5 years: Interest each year = 10,000 × 5% = $500. Over 5 years = 5 × $500 = $2,500. Total = 10,000 + 2,500 = $12,500.
Simple vs compound
The chart fills in the principal and the simple interest stacked on top — a straight-topped band — while the line above it shows what the same principal and rate would reach with interest compounding once a year. The gap between them is what compounding adds, and it widens every year as compound interest earns interest on its own interest.
Over short periods the two are almost identical; the difference only becomes large over many years or at high rates. At 5% over 5 years compounding adds only a couple of hundred on \$10,000 — but stretch it to 30 years and the compound figure pulls far ahead.
Where simple interest is actually used
Most savings and investments compound, so simple interest is the exception rather than the rule. You still meet it in specific places: many car and personal loans, some bonds and fixed deposits that pay interest out rather than reinvesting it, and short-term or informal loans quoted at a flat rate.
It is also the cleaner teaching tool — the straight-line case that makes the power of compounding obvious by contrast. If interest is left to accumulate, the Compound Interest calculator is the one you want.
— Reader questions
What is the simple interest formula?
Interest = Principal × annual rate × time in years. The total amount you end with is the principal plus that interest, or equivalently Principal × (1 + rate × time).
How is simple interest different from compound interest?
Simple interest is always calculated on the original principal, so the same amount is added each period and the balance grows in a straight line. Compound interest is calculated on the principal plus all previously earned interest, so it accelerates over time. This page shows both side by side.
When would I actually earn or pay simple interest?
It is common on some car loans, personal loans and short-term lending, and on bonds or deposits that pay interest out instead of reinvesting it. Most savings accounts and investments, by contrast, compound.
Does simple interest account for monthly or daily periods?
The formula uses time in years, so a part-year is just a fraction — six months is 0.5 years. Enter years and months and the calculator handles the fraction; because interest is simple, the frequency within the year does not change the result.