Simple Interest Calculator

Simple Interest = (Principal × Rate × Time) ÷ 100. For example, $10,000 at 8% per year for 5 years gives SI = (10,000 × 8 × 5) ÷ 100 = $4,000. The total amount returned is Principal + SI = $14,000. Unlike compound interest, the interest is always calculated only on the original principal.

Simple interest is calculated only on the original principal each year — it grows linearly. Compound interest is calculated on the principal plus previously accumulated interest — it grows exponentially. Over long periods, compound interest generates significantly more wealth. For example, $10,000 at 8% for 20 years: SI gives $16,000 in interest, while compound interest (monthly) gives approximately $39,521.

Most home loans and mortgages use amortized interest, which is a form of compound interest. However, some short-term personal loans, car loans, and certain government schemes (especially in India) use simple interest. Always check your loan agreement — the term “flat rate” often means simple interest, while “reducing balance” means compound interest on the outstanding principal.

Simple interest itself cannot be negative — the formula SI = P × R × T ÷ 100 always produces a non-negative result when P, R, and T are positive. However, the real return on an investment can be negative after adjusting for inflation. If the interest rate is lower than the inflation rate, the purchasing power of your money decreases even though the nominal interest earned is positive.