Calculate simple interest on a principal amount
Calculates interest that accrues only on the original principal, so it does not compound. Common for short-term loans, car loans, and some treasury instruments.
I = P × r × t | A = P + I
Iinterest earned/paidPprincipalrannual interest rate (decimal)ttime in yearsSimple interest is calculated only on the original principal: Interest = Principal × Rate × Time. Unlike compound interest, it does not earn interest on accumulated interest.
Simple interest is linear, with the same amount of interest accruing each period. Compound interest is exponential, since interest earns interest, which leads to faster growth over time.
Simple interest is commonly used for short-term loans, car loans, some personal loans, and treasury bills. It provides straightforward, predictable interest calculations.