Simple Interest Calculator
Simple interest is charged or earned only on the original principal — no interest on interest. Use this calculator for short-term loans, car notes, and bonds, and see how much less it pays than compounding.
How this calculator works
Simple interest is principal × annual rate × time. $10,000 at 5% for 3 years earns 10,000 × 0.05 × 3 = $1,500, and the total owed or paid out is $11,500. Because interest never compounds, the balance grows in a straight line — unlike a compound account, where the balance curve steepens over time.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal, so the interest you earn or owe stays constant each year. Compound interest adds each period's interest to the balance, so the base grows and interest accelerates — over long terms the difference is large. $10,000 at 5% for 10 years earns $5,000 simple but $6,289 compounded annually.
Where is simple interest actually used?
Short-term loans, most auto loans, personal loans with simple-interest terms, and some bonds pay or charge simple interest. Most savings accounts, CDs, and credit cards compound instead — so check the terms before comparing rates.
Why does my loan statement look different from this?
Loans that charge simple interest still amortize — each payment settles accrued interest first, then reduces principal, so the interest portion shrinks over time. This calculator shows total interest over the full term; your statement shows the split per payment.
Disclaimer: Results are estimates for general information only and do not constitute financial, tax, or legal advice. Figures reflect 2026 rules and may change. Always confirm current limits and consult a qualified professional before making decisions. Official figures: IRS.gov · 2026 limits per IRS tax inflation adjustments.