TheFreeTool

Simple Interest Calculator

Enter the starting amount, the yearly interest rate and the number of years. You will see the simple interest and, for comparison, what yearly compounding would give.

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Good to know

This is an estimate for general information. It is not tax, legal or financial advice. Your payslip can differ because of tax codes, credits, local taxes, benefits and your employer's rules. Check official guidance or ask a qualified adviser.

What it does

  • Simple interest from amount, rate and time
  • Total amount with interest
  • Side-by-side comparison with yearly compounding
  • Any currency from the currency menu

How to use it

  1. Enter the starting amount.
  2. Enter the yearly interest rate and the number of years.
  3. Read the simple interest, the total and the compound comparison.

How is simple interest calculated?

Simple interest is charged only on the original amount. The formula is amount × rate × years. $10,000 at 5% for 3 years earns $500 a year, so $1,500 in total.

Compound interest adds the interest to the balance each year, so you earn interest on interest. Over the same 3 years, yearly compounding gives about $11,576 instead of $11,500. The gap grows the longer the money is invested. Many short loans and some bonds use simple interest.

Example

$10,000 at 5% a year for 3 years earns $1,500 of simple interest, so the total is $11,500. With yearly compounding the total would be about $11,576.

Questions people ask

What is the difference between simple and compound interest?
Simple interest is only on the starting amount. Compound interest is also on the interest already added.
Where is simple interest used?
Some short-term loans, car loans and bonds. Savings accounts usually compound.
Can I use months?
Yes. Enter the time as a decimal, for example 0.5 for six months.

Disclaimer

This tool is for general information only. It is not financial, tax, investment or legal advice, and results are estimates that may differ from your bank, lender or tax authority. Rates, limits and tax rules change. Bank and brand names are used only to describe what the tool does; they belong to their owners and we are not affiliated with them. Check the figures with a qualified professional or your provider before you decide. You use this tool at your own risk, and TheFreeTool is not liable for any loss that follows. Read the full disclaimer

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