How to Use This Simple Interest Calculator
Using this calculator takes just seconds:
- Enter Principal: The initial amount of money ($1,000)
- Enter Rate: Annual interest rate (5%)
- Enter Time: How long in years (2 years)
- Click Calculate: Get your interest and total instantly
Pro tip: Simple interest doesn't compound—great for understanding basic interest calculations.
What is Simple Interest?
Simple interest is interest calculated only on the principal amount, not on accumulated interest. The formula is: Interest = Principal × Rate × Time
Simple vs Compound Interest
- Simple Interest: Calculated only on principal. Easier to understand.
- Compound Interest: Calculated on principal + accumulated interest. Grows faster.
Frequently Asked Questions
What's the formula for simple interest?
I = P × R × T, where I = interest, P = principal, R = rate (as decimal), T = time in years
Why use simple interest instead of compound?
Simple interest is easier to calculate and understand. It's used for short-term loans and bonds.