Calculate simple interest using I = P × r × t and compare with compound interest
Simple interest is calculated only on the principal amount using the formula I = P × r × t. This calculator shows the interest earned, total amount, and provides a monthly and yearly breakdown. It also compares the results with compound interest at the same rate so you can see the difference between the two methods.
Simple interest is commonly used for short-term loans, auto financing, and some bonds. Unlike compound interest where interest earns interest, simple interest is predictable and easy to budget for both borrowers and lenders. Use this calculator to compare the two methods and understand the power of compounding.
Many auto loans, personal loans, and short-term loans use simple interest. Some bonds and certificates of deposit also calculate interest using the simple interest method rather than compounding.
With simple interest, you earn interest only on the original principal. With compound interest, you earn interest on both the principal and previously earned interest, resulting in exponential growth over time. At the same rate, compound interest always yields a higher total than simple interest.