Estimate simple interest, total repayment, monthly equivalent cost, and return using principal, rate, and time for US and UK users.
| Period | Interest Only | Total Cost Equivalent |
|---|
This tool provides estimates for informational purposes only and is not a substitute for professional financial, legal, or lending advice. Individual results vary based on lender terms, fees, repayment structure, and personal circumstances. Always review your agreement carefully and consult a qualified adviser before making borrowing or investment decisions.
freeusukcalculator.com
| Item | Value |
|---|
Simple interest is calculated only on the original principal, using the formula I = P Γ r Γ t, where P is the principal, r is the annual interest rate as a decimal, and t is the time in years. For example, Β£1,000 borrowed at 5% for 3 years earns 1,000 Γ 0.05 Γ 3 = Β£150 in interest, for a total repayment of Β£1,150.
To work with months or days, express the time as a fraction of a year β 6 months is 0.5, and 90 days is about 0.247. Because the interest never compounds, it grows in a straight line, making simple interest easy to predict and quick to calculate by hand.
The key difference is what the interest is charged on. Simple interest applies only to the principal, so the amount added each period stays the same. Compound interest applies to the principal plus previously accrued interest, so it accelerates over time β the larger the balance grows, the more interest it generates.
Simple interest is common on short-term loans, some car finance and certain bonds, where its predictability is an advantage to the borrower. Savings accounts, credit cards and most long-term loans use compound interest instead. Over long periods the gap is dramatic, which is why compounding is so powerful for savers and so costly for borrowers carrying a balance.
Simple interest = Principal Γ Rate Γ Time (I = P Γ r Γ t), where the rate is a decimal and time is in years. The total amount owed is the principal plus this interest.
Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest is charged on principal plus accumulated interest, so it grows faster over time.
It is common on short-term loans, some car loans, and certain bonds. Many everyday savings and credit products use compound interest instead.
Yes β express the time as a fraction of a year (for example 6 months = 0.5, or 90 days β 0.2466) and the formula still applies.