Finance
Simple interest calculator
Calculate simple interest on a principal over time — and see, side by side, how much more the same money would earn if it compounded instead.
- Simple interest
- $2,500.00
- Total (simple)
- $7,500.00
- Total if compounded yearly
- $8,144.47
Simple interest is charged only on the principal. The compound figure (annual compounding) is shown for comparison — it grows faster because interest earns interest.
Interest on the principal, and nothing else
Simple interest is the most straightforward kind: you earn (or pay) a fixed percentage of the original amount each year, and that figure never changes. It’s easy to reason about, which is exactly why it’s worth knowing where it does and doesn’t apply.
Why compounding wins over time
$5,000 at 5% for 10 years earns $2,500 in simple interest — a total of $7,500. The same money compounded yearly grows to about $8,144, because each year’s interest starts earning too. The longer the horizon, the wider that gap. Explore it in the compound interest calculator.
Go deeper
Interest is one of the most important ideas in personal finance. The Finance subject covers saving, borrowing, and investing from the ground up.
Frequently asked questions
- What is the simple interest formula?
- Interest = principal × rate × time, with the rate as a decimal and time in years. So $5,000 at 5% for 10 years earns 5,000 × 0.05 × 10 = $2,500. The interest is the same each year because it’s always charged on the original amount only.
- What’s the difference between simple and compound interest?
- Simple interest is paid only on the original principal, so it grows in a straight line. Compound interest is paid on the principal plus the interest already earned, so it accelerates. Over long periods compound interest pulls far ahead of simple.
- When is interest actually simple?
- Some short-term and car loans, and certain bonds, use simple interest. Most savings accounts, mortgages, and credit cards compound. Always check which one applies before comparing offers.
- Is it free to use?
- Yes — no sign-up, calculated in your browser. Figures are estimates.