Calculate the interest on a loan or investment using the simple interest formula.
Simple interest is a quick method of calculating the interest charge on a loan or the interest income on an investment. It is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
This calculator assumes interest is calculated annually.
Total Interest (I) = P × r × t
Total Amount (A) = P + I
Where:
P = Principal Amount
r = Annual Interest Rate (decimal)
t = Time in Years
Principal: $1,000
Rate: 5%
Time: 3 Years
Simple interest is interest calculated only on the initial principal. It does not account for compounding interest (interest on interest).
Compound interest calculates interest on both the principal and the accumulated interest from previous periods, leading to faster growth or debt accumulation. Simple interest remains constant based on the principal.