Interest on the principal only — never on interest itself. Click a tab to solve for that piece of I = P × r × t. (Real life mostly compounds; for that, use the Interest Calculator.)
Interest is what you pay to borrow money, or what you're paid to lend it — on an auto loan, a credit card, or a deposit in an interest-bearing account. Simple interest is the plain version of the idea: it is always computed on the original sum (the principal) and nothing else. The percentage is fixed for the life of the arrangement, and no matter how many times interest is tallied, previously accrued interest never joins the base. Each period adds the same number of dollars as the last — growth in a straight line.
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With I = total interest, P = principal, r = annual rate (as a decimal), t = term in years. The "t" flexes to the real period: six months is t = 0.5. The same formula per period reads I = Prn — rate per period, times the number of periods. A worked pair: borrow $10,000 at 5% annual simple interest for five years and the interest is $10,000 × 0.05 = $500 a year, × 5 = $2,500, for a total repayment of $12,500. Per period instead: at a 5% monthly rate over 12 months, interest is $10,000 × 0.05 × 12 = $6,000, total $16,000. (Divide a total back down and you can quote the interest per month or per day.)
Borrowers should hope for it: you only ever pay on the original balance, so a given rate costs less than its compounding twin — which is why you'll find it on some short-term loans. Lenders and investors get the worse side of the same deal: earnings that don't compound leave growth on the table. Simple interest survives in pockets where its plainness is the point — a bond's coupon is simple interest on face value, paid out in cash; some investments quote a simple return as a dividend. In both cases the catch is the same: paid-out interest only starts compounding when you reinvest it as new principal. Most checking and savings accounts, and essentially all credit cards, compound instead.
Compound interest charges (or pays) on principal plus accumulated interest — interest on interest — under A = P(1 + r/n)nt, where n is how often it compounds per year. Take the $10,000, 5%, five-year loan from above. Simple: $12,500 total. Compounded monthly: $12,833.59 — $2,833.59 of interest instead of $2,500. Five years at 5% is a gentle case; stretch the term or the rate and the gap doesn't grow politely, it grows exponentially. The results panel above shows this comparison for your own numbers on every calculation. So the rule of thumb stands: borrow on simple interest when you can, save and invest where it compounds — and check which one a contract actually uses before signing anything.
Because every period adds the identical interest amount — P × r never changes. A compounding balance curves upward instead; the straight line is simple interest's fingerprint.
No. Set the rate to "per month" and the term to "years"; the calculator converts both to a common annual basis and shows the conversion in the calculation steps.
No — cards compound (typically daily on the average daily balance), which is why card debt snowballs. Simple interest shows up more in short-term loans and bond coupons.
The compound interest calculator converts rates between frequencies and projects growth; the interest calculator adds contributions, tax, and inflation.
Disclaimer: This calculator provides estimates for educational purposes only and does not constitute financial advice.