When simple interest fits
Use this calculator when interest is charged or earned only on the original principal. It is useful for quick checks, but it is not the right model for credit cards, many savings accounts or loans that compound or amortize.
Example
For $1,000 at 5% simple interest for 3 years, interest is 1,000 x 0.05 x 3 = $150, so the total amount is $1,150.
Common mistakes
Use the annual rate as a decimal in the formula. If the term is in months, convert it to years before using this simple annual formula.
Simple vs compound interest
Simple interest applies only to the original principal. Compound interest also earns interest on prior interest, so the gap between the two grows over longer time periods.
Last reviewed: 2026-05-17