Simple Interest Calculator
Flat interest on the original principal, with the compound gap shown
- Final balance
- $12,500.00
- Extra if compounded
- $262.82
What annual compounding would add over the same period
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How to use
Simple interest uses the formula I = P × r × t. Because interest never earns interest, the balance grows in a straight line — which makes it cheaper than compound interest when you are borrowing and worse when you are saving.
Enter the principal
The original amount lent, borrowed or deposited. Under simple interest this figure never changes, which is what separates it from compound interest.
Enter the annual rate
The flat annual percentage. If your agreement quotes a monthly rate, multiply by twelve first, since this field expects an annual figure.
Set the term in years
Fractional years are fine — enter 0.5 for six months or 1.5 for eighteen. Interest accrues proportionally, so half a term produces exactly half the interest.
Compare against compounding
The compound difference shows what annual compounding would have added over the same period. On short terms it is small; over decades it becomes the dominant factor.
Examples
A five-year personal loan
10,000 at 5% simple interest for 5 years accrues 2,500 in interest — exactly 500 per year, every year — for a total repayment of 12,500. Under annual compounding the same terms would cost about 2,763, roughly 263 more.
A short-term deposit
25,000 at 4% for 9 months (0.75 years) earns 750. Because the term is short, compounding would add only a few pounds — this is why simple interest is common on short-dated instruments.
About this tool
Calculate simple interest, where interest accrues only on the original principal and never on interest already earned. Enter the principal, annual rate and term to see the interest and final total. The result also shows what compounding would have added, so you can judge which arrangement you are actually being offered.