Simple Interest Calculator
Calculate simple interest I = P × r × t from principal, rate, and time.
Returns total interest, total amount, and comparison to compound interest growth.
Simple interest is calculated only on the original principal amount — it does not compound (interest does not earn further interest). It is used for short-term loans, savings bonds, and some personal loans.
The formula: I = P × r × t
Where:
- I = interest earned or paid
- P = principal (the starting amount)
- r = annual interest rate (as a decimal, so 5% = 0.05)
- t = time in years
Total amount after interest: A = P × (1 + r × t) Or equivalently: A = P + I
Worked examples:
Example 1 — Savings: Deposit £5,000 at 4% simple interest for 3 years. I = £5,000 × 0.04 × 3 = £600 Total after 3 years = £5,600
Example 2 — Loan: Borrow £2,000 at 8% simple interest for 18 months (1.5 years). I = £2,000 × 0.08 × 1.5 = £240 Total repayment = £2,240
Example 3 — Car loan comparison: £15,000 loan at 6% simple interest for 5 years: Interest = £15,000 × 0.06 × 5 = £4,500 Total = £19,500
Simple vs compound interest: With simple interest at 5% on £10,000 over 5 years: £12,500 With compound interest at 5% on £10,000 over 5 years: £12,763 The difference grows significantly over longer periods — over 30 years, compound interest at 5% produces £43,219 vs £25,000 with simple interest.
Where simple interest appears:
- Treasury bills and some government bonds
- Most car loans (US)
- Some personal loans
- Short-term business loans
- Penalty interest on late tax payments (HMRC, IRS)