# Simple Interest Calculator

- **URL:** https://codeasystem.com/calculators/finance/simple-interest-calculator/
- **Category:** finance
- **Description:** Calculate interest that pays only on the original principal; no reinvestment, no compounding.
- **Primary output:** Interest earned: $750.00

## Inputs
- Principal (name: `principal`, type: number, prefix: $, example: 5000)
- Annual interest rate (name: `rate`, type: number, example: 5)
- Time (name: `years`, type: number, example: 3)

## Outputs
- Interest earned: $750.00
- Final amount: $5,750.00
- Interest per year: $250.00

## Formula / methodology
```
I = P · r · t
```

Simple interest multiplies the principal by the annual rate and the time in years. The same dollar amount of interest is credited every period because earlier interest is never added back to the base.

## Assumptions & limitations
- Rate stays constant for the whole period.
- Fractional years are allowed (e.g. 2.5).
- Real-world loans labeled “simple interest” (some auto loans) accrue daily; results match when periods align.

## Example
$5,000 at 5% simple interest for 3 years earns exactly $750, for a final balance of $5,750.

Result for these inputs:

```
Interest earned: $750.00
```

## About this calculator
### Simple versus compound

At low rates and short horizons the two barely differ. At 7% for 30 years, however, compounding turns $10,000 into about $76,000 while simple interest reaches only $31,000.

### Where simple interest shows up

Short-term personal loans, some bonds that pay coupons you spend rather than reinvest, and classroom finance problems all use the linear formula.

## FAQs
### Can I enter months instead of years?

Yes; divide months by 12 (18 months = 1.5 years).

### Why is my bank paying more than this?

Because banks compound. Reinvested interest grows the base, producing compound rather than simple interest.

### Is simple interest ever charged on loans?

Yes; some auto and short-term loans accrue simple daily interest, which can favor borrowers who pay early.

## Related calculators
- [Compound Interest Calculator](https://codeasystem.com/calculators/finance/compound-interest-calculator/)
- [APY Calculator](https://codeasystem.com/calculators/finance/apy-calculator/)
- [Rule of 72 Calculator](https://codeasystem.com/calculators/finance/rule-of-72-calculator/)

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Last updated: 2026-08-23 · Version: 1.0.0 · [HTML version](https://codeasystem.com/calculators/finance/simple-interest-calculator/)