Simple Interest Calculator (P × R × T)
Calculate simple interest, total amount, and daily interest for any loan.
Simple Interest vs Compound Interest
Simple interest charges interest only on the original principal — if you borrow $1,000 at 5% for 3 years, you pay $150 in interest ($50/year × 3 years). Compound interest charges interest on the principal PLUS accumulated interest — the same loan compounded annually costs $157.63. The difference grows dramatically over time: at 30 years, simple interest on $10,000 at 8% = $24,000 in interest. Compound interest = $90,627. Simple interest is rare in modern lending — it appears mainly in some auto loans, student loan subsidized periods, and short-term personal loans.
Where Simple Interest Still Applies
Some auto loans use simple interest (interest accrues daily on the remaining balance — paying early reduces total interest). Treasury bills and some bonds pay simple interest. Short-term personal loans from some lenders use simple interest. If your loan uses simple interest, making payments even a few days early saves money because interest stops accruing on paid-down principal immediately. This is the one advantage of simple interest for borrowers.
Over 30 years at 7%, $10,000 grows to $76,123 with compound interest but only $31,000 with simple interest.
