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Simple Interest Calculator

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The initial capital is the amount you will invest or lend at the beginning of the period.
$
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The interest rate is the percentage that will be applied to the initial capital during the period. It can be monthly or yearly.
%
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The time is the period during which interest will be applied. It can be in months or years.

How to Use the Simple Interest Calculator

To use the simple interest calculator, follow the steps below:

  1. Enter the initial capital you want to invest or lend in the Initial Capital ($) field.
  2. Enter the interest rate in the Interest Rate (%) field. Select whether the rate is monthly or yearly from the dropdown menu next to it.
  3. Set the period during which interest will be applied in the Period (t) field. Choose whether the period is in months or years from the corresponding dropdown menu.
  4. Click the Calculate Simple Interest button to see the results.

After clicking the button, the calculator will display a summary of your investment, including the total invested, total interest, and final amount. In addition, graphs will be presented that illustrate the distribution of the amount and the evolution of the investment over time.

Example

Suppose you invest $1,000.00 with an annual interest rate of 12% for a period of 2 years.

Example of simple interest calculation

By entering these values into the calculator and clicking "Calculate Simple Interest", you will see the investment summary and corresponding graphs, allowing you to clearly visualize how your investment grows over time thanks to simple interest.

Example of simple interest calculation result

What is Simple Interest?

Simple interest calculates earnings only on the initial capital, without accumulating interest over time.

Quick example: investing $100.00 at 10% per year, you end the first year with $110.00. In the second year, interest is applied to $100.00 and generates $10.00, closing the period with $120.00.

This mechanism is not the most used in investments, loans, and financing, as it does not take advantage of the growth potential of compound interest. Additionally, it does not reflect the reality of many financial markets, where interest is capitalized periodically.

Need to compare with compound interest? Visit our compound interest calculator to see the results side by side.

Difference Between Simple and Compound Interest

Simple interest always targets only the initial capital. Compound interest accumulates each gain and reinvests it, growing at an accelerated pace each period.

Comparing: with 10% per year, compound interest will yield more as time goes on. Meanwhile, simple interest will always yield the same amount annually. That is, if we invest $100.00 at 10% per year, in 10 years we will have: $200.00 total in simple interest versus $259.37 total in compound interest.

Even though the difference may seem small at first, over time compound interest significantly outperforms simple interest. With our example, in the third year you would already have $133.10 with compound interest, while simple interest would only yield $30.00 in total. If we continue this example for 10 years, simple interest would give $100.00, while compound interest would result in $259.37.

Simple Interest Formulas

Unlike compound interest, we have more direct formulas to calculate the final amount in simple interest.

Basic Simple Interest Formula

M = C × (1 + i × t)

With this formula, you can calculate the final amount (M) when investing an initial capital (C) at an interest rate (i) for a given number of periods (t).

M=C×(1+i×t)\mathbf{\mathbf{M = C \times (1 + i \times t)}}
MM — final amount (capital + interest).
CC — initial capital applied.
ii — interest rate per period (decimal: 5% = 0.05).
tt — number of capitalization periods.

Just as in compound interest, the interest is calculated by M - C, that is, the final amount minus the initial capital.

J=C×i×t=M−C\mathbf{J = C × i × t = M - C}

FAQ

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01. What are simple interest and what is the main difference from compound interest?

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02. How to calculate the final amount and interest in simple interest?

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03. When is the simple interest system used in the market?

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