Free Simple Interest Calculator
Simple interest is charged only on the original principal — it doesn't compound. It's the standard for short-term business loans, promissory notes and most invoice-financing arrangements.
Results
Disclaimer: This calculator provides estimates only and does not constitute financial advice. Actual loan terms may vary by lender.
What the Simple Interest Calculator does
Simple interest is calculated only on the original principal for the entire loan period, without compounding on accrued interest. It is the standard method for many short-term business loans, promissory notes and invoice-financing arrangements.
Methodology and formula
Simple Interest = (Principal x Rate x Time) / 100, where Time is in years; Total Repayment = Principal + Simple Interest.
Worked example
- Inputs
- Principal 15,000; annual rate 12%; time 18 months (1.5 years).
- Result
- Simple interest = 15,000 x 12 x 1.5 / 100 = 2,700; total repayment = 17,700.
Because interest is flat on the principal, the 2,700 owed here doesn't change even if the borrower pays late, unlike a reducing-balance loan where a missed payment recalculates the outstanding balance.
When to use this tool
Use this for short-term, flat-rate financing such as invoice discounting or promissory notes. Use the Compound Interest Calculator for savings and investments that compound, or the Business Loan Calculator for standard reducing-balance term loans.
About the Simple Interest Calculator
The formula
Simple Interest = (Principal × Rate × Time) / 100. Total Repayment = Principal + Interest. Time is expressed in years; if your period is in months, divide by 12 (this tool handles that automatically via the units toggle).
Simple vs compound
Simple interest is charged flat on the principal. Compound interest is charged on principal plus previously accrued interest, which grows the total much faster over long periods. For anything longer than a year, always model both.
Where you'll see it
Short-term business loans, working-capital lines, invoice discounting, some personal loans and most car loans marketed as 'flat rate'. Note: a 'flat 10%' loan usually has an effective (reducing-balance) rate closer to 18%.
Frequently asked questions
What is simple interest?
When is simple interest used?
Simple or compound — which costs more?
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