Simple Interest Calculator – Calculate Interest Online
Compute interest earned or paid using the simple interest formula, with optional monthly deposits.
About the Simple Interest Calculator
What is the Simple Interest Calculator?
A simple interest calculator computes interest that is calculated only on the original principal, never on previously earned interest.
Why use this calculator?
Simple interest is easy to understand and is common on short-term loans, car loans and some savings products. It is the foundation for understanding more complex compounding.
How to use it
- Enter the principal amount.
- Enter the annual interest rate.
- Enter the time period in years.
- The interest and final balance are shown instantly.
Formula
I = P × R × T
Simple interest does not compound; interest is never added to the principal for future calculations.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is paid only on the principal. Compound interest is paid on the principal plus accumulated interest, so it grows faster over time.
Where is simple interest used?
Common examples include short-term consumer loans, some auto loans, and interest paid on certain bonds or savings accounts that do not compound.
How much should I save each month?
A common guideline is 20% of income, but the right number depends on your goals. Work backwards from your target amount and time frame.
What is an emergency fund and how big should it be?
It is cash set aside for unexpected expenses. Most planners suggest three to six months of essential living costs.
Where should I keep short-term savings?
High-yield savings accounts and money-market funds are typical because they are liquid and low risk, even if returns are modest.
What is the rule of 72?
Divide 72 by your annual interest rate to estimate how many years it takes to double your money. At 6%, that is about 12 years.
What is compound interest?
Compound interest is interest earned on both your original money and on previously earned interest. Over time it can make savings grow much faster than simple interest.
What is the difference between nominal and effective return?
The nominal return ignores compounding within the year, while the effective (annualised) return accounts for it. The effective figure is usually higher and better reflects real growth.
How does inflation affect my returns?
Inflation erodes purchasing power. The real return is the nominal return minus inflation, so an investment can grow in dollars yet still lose value in what it can buy.
What rate of return should I assume?
A common long-term assumption for a diversified stock portfolio is about 6% to 8% per year after inflation, but returns vary and are never guaranteed.