Calculate simple interest (SI = P × R × T) with monthly and yearly breakdown. Compare simple interest against compound interest on the same principal to see exactly how much more compounding earns. Instant results in any currency.
Enter the principal amount, the annual interest rate as a percentage, and the time period in years (you can use decimals — e.g. 2.5 for 2 years 6 months). Select your currency for display formatting.
The results show the total simple interest earned, total amount (principal + interest), and a year-by-year breakdown showing the interest earned each year. Unlike compound interest, simple interest accrues only on the original principal — so interest is the same each year.
The comparison table shows what you would earn with compound interest (compounded annually) at the same rate and time period. This illustrates the compounding advantage — how much more you earn when interest is reinvested. The longer the period and higher the rate, the bigger this gap.
Simple interest is calculated only on the original principal amount, not on accumulated interest. The formula is SI = P × R × T, where P is the principal, R is the annual interest rate (as a decimal), and T is the time in years. Simple interest grows linearly — the interest earned each year is always the same amount.
Simple interest is used for short-term loans, car loans, savings accounts (though most now use compound interest), some personal loans, student loans (during the in-school period), and most treasury bills. It is also used for calculating overdue payments, late fees, and simple loan agreements between individuals. Most short-term financial instruments use simple interest for straightforward calculations.
Simple interest is earned only on the principal. Compound interest is earned on the principal plus all previously accumulated interest. On $10,000 at 5% for 10 years: simple interest gives exactly $5,000 total interest (same $500 each year). Compound interest (annually) gives $6,289 total interest ($500 the first year, growing each year after). The longer the period, the greater the compound advantage.
To find the compound interest equivalent of a simple interest rate over n years, use: r_compound = (1 + r_simple)^(1/n) - 1 for the equivalent effective rate. Alternatively, for a direct comparison, simply calculate the total amount under both methods with the same inputs. The compound amount always equals or exceeds the simple amount after one compounding period.
To calculate simple interest for a period expressed in months rather than years, use T = months/12. For example, 6 months at 8% APR on $5,000: SI = 5,000 × 0.08 × (6/12) = $200. You can also express the rate as a monthly rate: Monthly Rate = Annual Rate / 12, then multiply by the number of months.
The formula itself can produce a negative result if the rate or time is negative, but in practice simple interest is always positive or zero for standard financial instruments. If you are calculating the interest component on a loan where payments exceed interest due, the balance decreases — but the interest itself is always a positive charge on the outstanding balance.
