Simple Interest Calculator – I = P × r × t Formula
Calculate simple interest on any principal amount. Unlike compound interest, simple interest is calculated only on the original principal — not on accumulated interest. Ideal for short-term loans, auto financing, and Treasury bills.
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Simple Interest Results
Principal: $10,000
Interest Earned: $1,500
Total After 3 Years: $11,500
Compare with Monthly Compound Interest
With compound interest (monthly): $11,615
Compound interest yields $115 more than simple interest over 3 years.
Simple Interest FAQs
What is the difference between simple and compound interest?
Simple interest is calculated only on the initial principal — interest earned does not earn more interest. Compound interest earns "interest on interest," causing your money to grow exponentially faster over time. For short-term loans or investments (under 1 year), simple interest is common. For long-term savings, compound interest dominates.
What is the simple interest formula?
Simple Interest = Principal × Rate × Time (I = P × r × t). For example, $10,000 at 5% for 3 years earns $10,000 × 0.05 × 3 = $1,500 in interest. The total amount after 3 years is $11,500.
When is simple interest used?
Simple interest is commonly used for short-term loans (personal loans under 1 year), auto loans, some mortgages, and Treasury bills. Most savings accounts and investments use compound interest, which yields higher returns over time.
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