Simple Interest Calculator
Calculate the interest and total cost of any simple-interest loan or investment. Used for car loans, short-term notes, and some student loans — no compounding involved.
Loan / Investment Details
Enter your numbers and click Calculate to see results.
Simple Interest vs. Compound Interest
Simple interest is calculated only on the original principal — it never grows on accumulated interest. This makes it straightforward to understand and predictable for borrowers. You always know exactly how much interest you owe for any given period.
Compound interest, by contrast, calculates interest on both the original principal and the interest already earned or owed. Over long time horizons this difference becomes dramatic — compounding accelerates growth (great for savings) or accelerates debt (costly for borrowers).
Formula
Interest = Principal × Rate × Time
Where Rate is the annual rate as a decimal, Time is in years
Total Amount = Principal + Interest
Daily Interest = Total Interest ÷ Total Days
Where Simple Interest Is Used
- Auto loans: Most car loans use simple interest. Your daily interest is fixed, so paying early saves money — every dollar you pay reduces tomorrow's interest charge.
- Short-term personal loans: Many payday-alternative loans and credit union personal loans use simple interest to keep math transparent for borrowers.
- Some student loans: Certain federal student loans accrue simple interest during in-school and grace periods before capitalizing at repayment.
- Short-term business notes: Bridge loans, merchant cash advances, and some equipment notes are quoted as simple interest for the term.
Pro tip: Early payoff saves money on simple-interest loans
Because interest is calculated on the remaining principal balance each day, making extra principal payments on a simple-interest loan reduces both your balance and your daily interest accrual immediately. Even paying a few days early each month adds up over a multi-year loan.