What is the difference between simple and compound interest?

Simple interest is calculated on the principal only. Compound interest is calculated on principal plus accumulated interest, so it grows faster over time.

Is simple interest better than compound interest?

As a borrower, simple interest is better — you pay less. As a saver or investor, compound interest is better — your money grows faster.

What loans use simple interest?

Many auto loans, short-term personal loans, and some student loans use simple interest. Most mortgages and savings accounts use compound interest.

Simple Interest Calculator

The Simple Interest Calculator computes the interest earned or owed on a principal amount using the formula I = P × R × T. Simple interest is used in short-term loans, car loans, savings bonds, and some personal loans. Unlike compound interest, it is calculated only on the original principal — not on accumulated interest.

Principal Amount($)

Annual Interest Rate(%)

Time Period(years)

How to Use This Calculator

1
Enter the principal amount (initial investment or loan amount).
2
Enter the annual interest rate as a percentage.
3
Enter the time period in years.
4
Click Calculate to see the simple interest and total amount.

Frequently Asked Questions

Simple interest is calculated only on the original principal. Formula: I = P × R × T, where P is principal, R is annual rate (decimal), and T is time in years.

Related Calculators

🧮Compound Interest Calculator 🧮Loan EMI Calculator 🧮Savings Calculator