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Instantly calculate flat-rate interest. Determine exact returns on personal loans, certificates of deposit, and flat-rate bonds without compound math. This free online tool allows you to calculate simple interest quickly and accurately. No sign-up or installation required.
When money is borrowed or lent, the cost of that transaction is called Interest. In the vast world of modern finance, there are two main ways to calculate this cost: Simple Interest and Compound Interest.
Simple Interest is exactly what it sounds like—it is a straightforward calculation based strictly on the original Principal amount. With simple interest, you never pay "interest on interest." The fee remains flat, predictable, and mathematically identical every single year.
The formula for Simple Interest is taught in introductory finance classes around the world due to its elegance: I = P × R × T
The core amount of money that was originally deposited into the account, or originally borrowed from the lender. (e.g., $10,000).
The annual interest rate. In mathematics, this must be converted from a percentage into a decimal before calculating (e.g., 5% becomes 0.05).
The duration of the loan or investment. In standard financial formulas, 'T' is almost always represented in Years, not months or days.
Because compound interest is much more profitable for banks, simple interest has become somewhat rare in consumer lending. However, it is still the standard in several key financial sectors:
Expert clarification on interest structures, loan terms, and financial math.