When is simple interest actually used?

Short-term personal loans, some auto loans, treasury bills and many corporate bonds use simple interest. Most savings accounts and mortgages use compound interest.

How does this differ from compound interest?

Simple interest is only on the original principal. Compound interest also earns interest on previously accumulated interest, which grows faster over time.

Can I use months instead of years?

Enter a fractional year — for example, 0.5 for six months or 0.25 for three months.

Simple Interest Calculator

Work out interest that doesn't compound — just principal × rate × time.

Your details

Principal

Annual interest rate

Time (years)

Total interest

£1,500

over 3 years

Principal

£10,000

Total amount

£11,500

How this is calculated

Simple interest is calculated only on the original principal — never on accumulated interest. The formula is I = P × r × t, where P is the principal, r is the annual rate (as a decimal) and t is the number of years.

Simple interest is used for short-term loans, some car loans and many bonds. For most savings and long-term loans, compound interest applies instead.