Simple Interest Calculator
Calculate interest earned or owed using the simple interest formula.
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Simple Interest Formula
I = P × r × t I = Interest earned
P = Principal (initial amount)
r = Annual interest rate (as decimal)
t = Time in years
Examples
| Principal | Rate | Time | Interest | Total |
|---|---|---|---|---|
| $1,000 | 5% | 1 year | $50 | $1,050 |
| $5,000 | 7% | 2 years | $700 | $5,700 |
| $10,000 | 4.5% | 3 years | $1,350 | $11,350 |
| $25,000 | 6% | 5 years | $7,500 | $32,500 |
When to Use Simple Interest
- Short-term loans (less than 1 year)
- Car loans and auto financing
- Some personal loans
- Treasury bills and short-term bonds
- Calculating interest for partial periods
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What is simple interest?
Simple interest is calculated only on the principal amount. It does not compound, meaning you don't earn interest on previously earned interest.
What is the simple interest formula?
Simple Interest = Principal × Rate × Time. For example, $10,000 at 5% for 3 years = $10,000 × 0.05 × 3 = $1,500.
When is simple interest used?
Simple interest is commonly used for short-term loans, car loans, some personal loans, and calculating interest for specific periods.