Calculate flat interest on a principal with no compounding.
Simple interest is calculated only on the original principal using I = P × r × t. Unlike compound interest, earned interest does not itself earn further interest.
Interest earned
I = P × r × t
Final amount
A = P + I = P × (1 + r × t)
For informational purposes only and not financial advice.
It's common for short-term loans, some car loans, and certain bonds. Most savings accounts and long-term loans use compound interest instead.
Simple interest grows linearly on the principal only, while compound interest grows exponentially because it also earns interest on accumulated interest.