Simple interest is charged only on the original principal. The formula is I = P × r × t, and the amount due is P + I. Bank savings and most investments compound instead; this page is for notes, some bonds, and teaching the difference. Change the rate yourself — nothing here is a quoted product rate.
Interest (I)1,500.00
Principal + interest11,500.00
Principal returned10,000.00
How this calculation works
Interest I = principal × (annual rate ÷ 100) × years. Time can be a fraction (0.5 = six months).
Total = principal + interest. The principal never grows inside the formula, which is the whole point of “simple”.
If interest is added to the balance and then earns interest, that is compound interest — use the compound-interest calculator. For the same 5% over several years, compound finishes higher.
Rates are user-entered annual percentages. A 12% annual simple rate for one month is 12% × (1/12), not 12%.
Worked example
P = 10,000, r = 5%, t = 3 years → I = 10,000 × 0.05 × 3 = 1,500, total 11,500. Compounded annually at 5% would be 11,576.25 — the gap is interest-on-interest.
Frequently asked questions
When is interest simple rather than compound?
Some short notes, court-awarded interest in certain jurisdictions, and classroom problems. Consumer savings accounts almost always compound. Read the contract.
How is this different from compound interest?
Simple: the base never changes. Compound: each period the new base includes past interest. Link the compound-interest calculator to see the same P, r, t with compounding.
Can t be months?
Enter years as a decimal (3 months = 0.25) if the rate is annual. Do not type 3 if you mean three months at an annual rate.
Does the rate compound monthly if I enter 12 months?
No. Years = 1 still means one year of simple interest, not 12 compound steps. Use compound interest for monthly compounding.
What about adding deposits each year?
This formula has one principal. Recurring deposits need a savings or compound-with-contribution model.