Simple Interest Calculator
Calculate simple interest on loans, investments, and savings with accurate financial analysis
Calculate Simple Interest
Initial amount borrowed or invested
Annual percentage rate (APR)
Duration of the loan or investment
Simple Interest Results
Calculation Details
Interest Breakdown
Example Calculation
Car Loan Example
Principal: $25,000 (car loan amount)
Interest Rate: 6% per year
Time Period: 3 years
Calculation: I = P × R × T
Step-by-Step Solution
I = $25,000 × 0.06 × 3
I = $25,000 × 0.18
I = $4,500
Total Amount: $25,000 + $4,500 = $29,500
Monthly Payment: $4,500 ÷ 36 = $125.00 (interest only)
Common Interest Rates
*Rates vary by credit score and market conditions
Simple Interest Tips
Simple interest is calculated only on the principal amount
Used for short-term loans and some savings accounts
Interest remains constant throughout the loan term
Formula: Interest = Principal × Rate × Time
Lower cost compared to compound interest
Understanding Simple Interest
What is Simple Interest?
Simple interest is a method of calculating interest that is applied only to the principal amount of a loan or investment. Unlike compound interest, simple interest does not accumulate on previously earned interest, making it straightforward to calculate and understand.
When is it Used?
- •Short-term personal loans
- •Auto loans and some mortgages
- •Interest-only loan payments
- •Basic savings calculations
Simple Interest Formula
I = P × R × T
Interest = Principal × Rate × Time
- I: Interest earned or paid
- P: Principal amount (initial sum)
- R: Annual interest rate (as decimal)
- T: Time period in years
Final Amount Formula: A = P + I = P(1 + R × T)
Simple vs Compound Interest
Simple Interest
- • Interest calculated only on principal
- • Linear growth over time
- • Easier to calculate and understand
- • Lower total cost for borrowers
- • Common in short-term loans
Compound Interest
- • Interest calculated on principal + interest
- • Exponential growth over time
- • More complex calculations
- • Higher returns for investors
- • Standard for most investments
Real-World Applications
💳 Credit Lines
Some credit cards and lines of credit use simple interest for cash advances or promotional periods.
🚗 Auto Loans
Many car loans use simple interest, making monthly payments predictable and easy to calculate.
🏦 Treasury Bills
Government securities often use simple interest for short-term investments and bonds.