Published 19 October 2026 · Updated 24 October 2026
Simple interest is calculated only on the original principal — never on accumulated interest. €5,000 lent at 6% simple interest for 4 years earns exactly €1,200 in interest (€5,000 × 0.06 × 4), for a total of €6,200. Enter any amount, rate and time below — the calculator also shows what compounding would have done instead.
The calculator uses the classic formula I = P × r × t, where P is the principal, r is the annual rate as a decimal, and t is the time in years. The total amount is A = P + I, or equivalently A = P × (1 + r × t). Months are folded in as tmonths ÷ 12, so 2 years and 6 months becomes t = 2.5. The comparison line uses the compound formula Aci = P × (1 + r)t so you can see exactly what compounding adds. Everything runs in your browser — no sign-up, no data leaves your device.
Elena in Madrid lends a friend €5,000 at 6% simple interest for 4 years:
The gap between simple and compound interest looks small over a few years — but stretch it to 20 years and €5,000 at 6% yields €6,000 of simple interest (total €11,000) versus €11,036.81 of compound interest (total €16,036.81). Time is what makes compounding explosive, and simple interest never gets that boost.
| Principal | Rate | Years | Simple interest | Compound (monthly) |
|---|---|---|---|---|
| €10,000 | 5% | 5 | €2,500 | €2,834 |
| €10,000 | 5% | 10 | €5,000 | €6,470 |
| €10,000 | 5% | 20 | €10,000 | €17,128 |
| €50,000 | 4% | 10 | €20,000 | €24,542 |
Under simple interest, the interest each year is always the same amount. Under compounding, each year's interest earns its own interest next year — which is why the gap widens dramatically with time. Short-term loans and savings (under a year) barely differ; decade-long horizons differ enormously.
The simple interest formula is I = P × r × t, where I is the interest, P is the principal (starting amount), r is the annual interest rate as a decimal (5% = 0.05), and t is the time in years. The total amount is A = P + I, which can also be written A = P × (1 + r × t). For example, €10,000 at 5% for 3 years earns €1,500 in interest, for a total of €11,500.
Simple interest is calculated only on the original principal every period, so the interest earned never changes. Compound interest is calculated on the principal plus all previously earned interest, so it grows faster over time. On €10,000 at 5% for 10 years, simple interest yields €15,000 total while monthly compounding yields about €16,470 — a €1,470 difference.
Simple interest shows up in short-term and flat-rate products: many personal and consumer loans quote interest on the original principal (a flat rate), sub-one-year savings products often pay simple interest, and it is the standard for bond coupon payments and short-term commercial paper. Most mortgages and long-term savings, by contrast, use reducing-balance or compound calculations.
Yes — convert the months into a fraction of a year by dividing by 12. For 8 months, t = 8 ÷ 12 ≈ 0.667 years. The calculator above has a months field that does this automatically. The same idea works for days: divide by 365 (or 360, which some banks use — it makes a small difference worth knowing about).
Rearrange the formula I = P × r × t. Principal: P = I ÷ (r × t). Rate: r = I ÷ (P × t) — multiply by 100 to get a percentage. Time: t = I ÷ (P × r). For example, €600 of interest at 6% over 5 years means P = 600 ÷ (0.06 × 5) = €2,000 of principal.
Often yes. A flat-rate personal loan charges interest on the full original amount for the whole term, even though you are paying the principal down month by month. That makes a 5% flat rate roughly equivalent to a 9–10% reducing-balance rate on a 5-year loan. Always compare the APR — it reflects the true cost — rather than the headline flat rate.
The maths is identical for every currency — only the currency symbol changes. Enter your amounts in dollars, pounds, rupees or any other currency and the interest and totals are computed the same way. Interest = principal × rate × time works the same everywhere in the world.