Simple Interest Calculator

Simple Interest Formula & Explanation

Simple interest is calculated with the formula SI = P × r × t, where P is the principal amount, r is the annual interest rate (as a decimal), and t is the time in years. The total amount at maturity is A = P + SI. Simple interest is straightforward because interest is only calculated on the original principal — it never compounds on itself.

In contrast, our Compound Interest Calculator shows how interest builds on interest, producing exponentially larger returns over time. The comparison table above clearly illustrates this divergence. For fixed-term savings instruments that use simple interest, such as some bonds or short-term loans, the difference may be small — but over decades it becomes very significant.

If you're evaluating fixed-deposit products, our CD Calculator helps you compare certificate of deposit rates, including APY. Simple interest is commonly used for auto loans and personal loans, so knowing both formulas helps you make informed borrowing and saving decisions.