Simple interest is calculated only on the original principal, not on accumulated interest. Enter your principal, rate, and time to see total interest earned and a year-by-year breakdown.
Simple interest is the most basic interest calculation: a fixed percentage of the original principal, earned each period, regardless of how much interest has already accumulated. If you deposit $10,000 at 5% simple interest, you earn $500 per year for as long as the deposit lasts — year 1 earns $500, year 5 earns $500, year 20 earns $500. The interest never compounds onto itself.
Real-world simple interest is rarer than compound interest. Most savings accounts, investments, and loans use compound interest, where earned interest gets added to the principal and starts earning interest itself. Simple interest still applies in a few common cases: most U.S. auto loans, certain short-term personal loans, traditional U.S. Treasury bonds (where coupons are paid out rather than reinvested), and certain promissory notes. Understanding simple interest is also useful as a baseline for appreciating why compound interest is so much more powerful over time.
This calculator computes the total interest earned and the year-by-year accumulation for a simple-interest scenario. Use it for analyzing fixed-coupon bonds (where you take the income rather than reinvest), traditional savings instruments that don't compound, and educational comparisons against compound interest to see the difference. The math is straightforward but the contrast against compounding is instructive — and is the foundation for why financial advisors emphasize starting to invest early.
$25,000 auto loan, 7% APR, 5-year term, simple interest. I = 25,000 × 0.07 × 5 = $8,750 Total payments: $33,750 (over 60 months) Monthly payment: ~$495 A simple-interest auto loan accrues interest only on the remaining principal each month. As principal is paid down, less interest accrues. This is why early payments are mostly interest and later payments are mostly principal — the calculator output approximates total interest over the loan's life.
$50,000 in 10-year Treasury notes paying 4.5% annual coupon, taking the coupons as cash income rather than reinvesting. Annual interest: $50,000 × 0.045 = $2,250 Total interest over 10 years: $22,500 Principal returned at maturity: $50,000 Total received: $72,500 If you had reinvested coupons at the same 4.5%, the compound interest formula would produce ~$27,615 of total interest — about $5,115 more than the simple interest approach. The "spend the income" path is simpler but leaves money on the table over long horizons.
$1,000 principal at 8% interest for 40 years. Simple interest: I = 1,000 × 0.08 × 40 = $3,200. Final balance: $4,200. Compound interest (annual): A = 1,000 × 1.08^40 = $21,725. Final balance: $21,725. Compound interest produces over 5x the simple result. This gap — between linear growth and exponential growth — is why "compound interest" is sometimes called "the eighth wonder of the world." Starting investing 10 years earlier almost doubles the eventual balance because of the extra decade of compounding.
Use this calculator when working with financial products that genuinely use simple interest — most U.S. auto loans, certain short-term personal loans, traditional fixed-coupon bonds where you take income rather than reinvest, and some promissory notes between individuals.
It's also useful as a teaching tool. The contrast between simple and compound interest at long time horizons is one of the most important concepts in personal finance — and seeing the actual numbers is more convincing than reading about it. Run the same scenario through this calculator and the compound interest calculator to see the gap.
For most actual investing decisions, compound interest is the relevant math. Savings accounts, money market funds, mutual funds, ETFs, dividends reinvested via DRIP, and any retirement account all compound. Simple interest understates expected returns from these.
Pair this with the compound-interest calculator (for the standard investment math), the future-value calculator (handles both lump-sum and ongoing contributions with compounding), and the auto-loan calculator (for the detailed amortization of a simple-interest auto loan).
A practical use case worth noting: for personal loan agreements between family members or friends, simple interest is often the right structure (cleaner accounting, easier to verify, applicable interest rules under IRS imputed interest rules). The IRS publishes Applicable Federal Rates (AFRs) — the minimum interest rate to charge on a family loan to avoid imputed-interest tax issues. Simple interest at the AFR is a clean, defensible structure.
See how your money grows over time with compound interest and regular contributions.
Calculate the future value of a lump sum or annuity.
Calculate the Compound Annual Growth Rate of an investment.
Calculate Net Present Value for investment decisions with multiple cash flows.
Discount future money to find what it is worth today.
Find out how long it takes to reach $1 million (or any target).
Total Amount
$12,500
Total Interest
$2,500
Principal
$10,000
| Year | Start Balance | Interest | End Balance |
|---|---|---|---|
| 1 | $10,000.00 | $500.00 | $10,500.00 |
| 2 | $10,500.00 | $500.00 | $11,000.00 |
| 3 | $11,000.00 | $500.00 | $11,500.00 |
| 4 | $11,500.00 | $500.00 | $12,000.00 |
| 5 | $12,000.00 | $500.00 | $12,500.00 |