Simple Interest Calculator
With principal 10000 usd, annual rate 6 percent, time 5 years, simple interest comes to $3,000.00 — simple interest. It is reached in 7 steps, the last of which is 10000 * 0.06 * 5, and each one is printed on the page with its numbers filled in. The formula is the one published by SEC investor.gov, not an approximation fitted to it.
Interest charged on the principal only, with the compound figure beside it so the gap the two produce over the same term is visible rather than assumed.
Formula and sources checked · How we check
Principal 10000, Annual rate 6, Time 5 years
$3,000.00
Simple interest for the example below. Editing a field recomputes the calculator below; this figure holds the answer the page was loaded with.
It is written into the HTML rather than drawn by a script, so a search engine reading this page without running JavaScript still finds an answer.
- Simple interest — P × r × t
10000 * 0.06 * 5$3,000- Total repayable
10000 + 3000$13,000- The same money compounded yearly
10000 * pow(1 + 0.06, 5)$13,382- Compound interest
13382.256 - 10000$3,382- What compounding adds
3382.2558 - 3000$382.26- Interest a year
10000 * 0.06$600- Interest a day
10000 * 0.06 / 365$1.64
Worked example
$10,000 at 6% simple for five years earns $3,000 — $600 a year, every year, because the interest never joins the principal. Compounded yearly the same money earns $3,382, so compounding is worth $382 over five years and the gap widens with every year after.
How to work it out yourself
- 1.Use simple interest where the contract says so: most car loans in the US, many personal loans, short-term promissory notes and the interest a court awards on a judgment. Anything advertised as a "flat rate" is simple interest.
- 2.Do not use it for savings. A deposit account compounds, usually daily or monthly, and treating it as simple understates what it earns.
- 3.Watch the term. Over one year simple and compound are identical; the gap is what compounding adds after that, and it grows faster than the term does.
Simple against compound, by term
| Time (years) | Simple interest | Simple interest — P × r × t | Compound interest |
|---|---|---|---|
| 1 | $600.00 | $600 | $600 |
| 2 | $1,200.00 | $1,200 | $1,236 |
| 5 | $3,000.00 | $3,000 | $3,382 |
| 10 | $6,000.00 | $6,000 | $7,908 |
| 20 | $12,000.00 | $12,000 | $22,071 |
| 30 | $18,000.00 | $18,000 | $47,435 |
The formula
- Simple interest — P × r × t
10000 * 0.06 * 5 - Total repayable
10000 + 3000 - The same money compounded yearly
10000 * pow(1 + 0.06, 5) - Compound interest
13382.256 - 10000 - What compounding adds
3382.2558 - 3000 - Interest a year
10000 * 0.06 - Interest a day
10000 * 0.06 / 365
Source: SEC investor.gov — compound interest and how it differs, CFPB — auto loans: how interest and the total cost are worked out
Questions people actually ask
- What is the simple interest formula?
- I = P × r × t: principal times the annual rate as a decimal times the time in years. $10,000 at 6% for five years is 10,000 × 0.06 × 5 = $3,000. The interest is the same every year because it is always charged on the original principal.
- What is the difference between simple and compound interest?
- Simple interest is charged on the principal alone; compound interest is charged on the principal plus the interest already added. Over one year they are identical. Over five years at 6% the difference on $10,000 is $382, and over thirty it is $47,435 — more than four times the simple figure.
- Do car loans use simple interest?
- Most US auto loans do. Interest accrues daily on the outstanding balance and each payment covers the interest accrued since the last one, with the rest reducing the principal. Paying early therefore genuinely reduces the interest, which is not true of a precomputed-interest loan.
Related
- Compound Interest CalculatorFuture value of a starting balance plus monthly contributions, separating what you put in from what the interest earned.
- Interest CalculatorWhat a balance grows to under simple and compound interest, with the gap between the two shown as its own figure.
- Investment CalculatorWhat regular contributions grow to over time, with the inflation-adjusted figure beside the nominal one.
- Loan Payment CalculatorMonthly payment and total interest on any fixed-rate instalment loan — car, personal or student.
- Savings Goal CalculatorThe monthly contribution needed to reach a target by a date, given what you have saved already.
- ROI CalculatorReturn on investment as a total percentage and as an annualised rate, so holdings of different lengths compare fairly.
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