ganak.appSimple Interest Calculator
Calculate simple interest, total amount, and daily interest for loans or savings. Enter principal, annual rate, and time in years/months/days to see interest and payoff totals instantly.
| Year | Principal | Cumulative Interest | Total Value |
|---|---|---|---|
| 1 | $10,000 | +$500 | $10,500 |
| 2 | $10,000 | +$1,000 | $11,000 |
| 3 | $10,000 | +$1,500 | $11,500 |
Simple Interest is the most straightforward method of calculating interest on a principal amount. Unlike compound interest, simple interest is calculated only on the original principal—it doesn't earn "interest on interest."
This makes simple interest ideal for short-term loans, quick estimates, and situations where you want to know exactly how much interest will accrue without the complexity of compounding. Common applications include personal loans, auto loans (daily simple interest), and some savings products.
SI = Simple Interest (the amount of interest earned or owed)
P = Principal (initial amount borrowed or invested)
r = Annual interest rate (as a decimal, e.g., 5% = 0.05)
t = Time period in years
Example Calculation:
If you deposit $10,000 at 5% annual interest for 3 years:
SI = $10,000 × 0.05 × 3 = $1,500
Total Amount = $10,000 + $1,500 = $11,500
| Feature | Simple Interest | Compound Interest |
|---|---|---|
| Calculation basis | Principal only | Principal + accumulated interest |
| Growth pattern | Linear (constant) | Exponential (accelerating) |
| Total interest earned | Lower over time | Higher over time |
| Best for | Short-term loans, quick estimates | Long-term savings, investments |
| Formula | P × r × t | P × (1 + r/n)^(nt) - P |
| $10K at 5% for 10 years | $5,000 interest | $6,289 interest (annual compounding) |
Best for Short-Term
Simple interest is most accurate for loans under 1 year. For longer periods, compound interest is typically more realistic.
Daily Simple Interest
Auto loans often use daily simple interest—paying early reduces your total interest cost.
Watch for Hidden Fees
Simple interest calculations don't include fees, origination costs, or other charges that affect total loan cost.
Day Count Matters
Banks may use 360-day or 365-day years for interest calculations. This can slightly affect your total interest.
Auto Loans
Many car loans use daily simple interest, which means paying early or making extra payments directly reduces your interest cost.
Personal Loans
Short-term personal loans often use simple interest for straightforward payment calculations.
Certificates of Deposit
Some CDs pay simple interest rather than compound interest, especially shorter-term ones.
Educational Purposes
Simple interest is commonly taught in financial literacy courses as an introduction to interest concepts.