Simple interest is the most basic way to price borrowing or reward saving: interest is charged on the original principal only, never on accumulated interest. It appears in short-term loans, some bonds, car financing quotes, and many informal lending arrangements.
Cómo funciona
Enter the principal, the annual rate, and the time in years. The calculator multiplies the three together to get total interest, then adds the principal back to show the final amount — growth is perfectly linear, the same interest every year.
La fórmula
P is the principal, r is the annual rate as a decimal (5% → 0.05), and t is the time in years. Final amount = P + interest.
Ejemplo resuelto
10,000 at 5% for 3 years: interest = 10,000 × 0.05 × 3 = 1,500, so you end with 11,500. The same deal at compound interest would yield 11,576 — the gap grows quickly with longer terms.
Preguntas frecuentes
When is simple interest actually used?
Mostly for short terms: bridge loans, treasury bills, some auto loans, and late-payment penalties. Nearly all savings accounts and long-term loans compound instead.
How do I handle periods shorter than a year?
Express time as a fraction of a year: 6 months is t = 0.5, 90 days is t = 90/365 ≈ 0.247. The formula stays identical.
Is simple interest better for the borrower?
For the same quoted rate, yes — you never pay interest on interest. That's why comparing a simple-interest quote against a compound one requires converting both to total cost, which this calculator gives you directly.