# Simple Interest Calculator

Use our simple interest calculator to determine the interest earned on your principal. Simply enter the principal, interest rate, and number of periods (such as months or years).

Asset Brief is an independent publisher focused on helping you improve your financial decisions. Some of the products featured may be from our partners. This does not influence our reviews, which are based on many hours of research.

## Simple interest calculator

How much are you borrowing?
$What's your annual interest rate? % How long do you want to invest for? years What's your interest? Interest$2,200
Principal
$5,000 Total investment$7,200
After 8 years, your investment will be worth $7,200. The principal is$5,000 and the total interest earned is $2,200. How did we get this result? Simple interest calculation To calculate the interest on an initial principal of$5,000 earning 5.5% over 8 years, we use following simple interest formula:

Simple interest = Principal x Interest rate x Time

Where:

• Principal = $5,000 • Interest rate = 5.5% • Time = 8 years Simple interest =$5,000 x 5.5% x 8 years

Which is:

Simple interest is $2,200 Total investment calculation To find the total value of your investment at the end of 8 years, we add the principal and the interest. Total investment = Principal + Interest Where: • Principal =$5,000
• Interest = $2,200 Total investment =$5,000 + $2,200 Which is: Total investment is$7,200

## How does this simple interest calculator work?

A simple interest calculation applies the interest rate only to the principal amount, not on any earned interest.

The principal amount is the starting amount you have at the beginning. This could the the amount of money you want to invest, borrow, or loan to someone else.

Our simple interest calculator uses the following formula for simple interest to calculate the interest earned.

This simple interest formula calculates the total amount of interest earned.

The total amount that you receive is:

or

## Simple interest vs. compound interest

Simple interest is different from compound interest.

In a simple interest calculation, the interest rate is only applied to the original principal amount. The interest that you earn each period is not reinvested.

In a compound interest calculation, the interest rate is applied to the original principal amount as well as all earned interest from the previous periods. The earned interest amounts are reinvested at the same interest rate.

Let’s take an example to understand the difference between simple interest and compound interest.

Example

You want to calculate the interest on $100 at 10% interest for 2 years. Simple interest calculation In the first year, you would earn$10 or $100 x 10%. In the second year, you would also earn$10. The interest earned every year is the same.

At the end of two years, you have $100, the principal amount, and$20, the accumulated interest, for a total of $120.  Year 1 Year 2 Principal$100 $100 Amount you earn interest on$100 $110 Interest earned this year$10 $11 Total interest earned$10 $20 Total amount at the end of the year$110 $120 Compound interest calculation In the first year, you would earn the same as in the simple interest formula,$10.

However, in the second year, you apply the 10% interest to the principal and the previously earned interest, which would be $100 +$10 = $110. 10% of this is$11.

At the end of two years, you would have $121.  Year 1 Year 2 Principal$100 $100 Amount you earn interest on$100 $110 Interest earned this year$10 $11 Total interest earned$10 $21 Total amount at the end of the year$110 \$121