Simple Interest Calculator
Simple interest applies only to the original amount. It turns up in short-term loans, some bonds and certain instalment agreements. The calculator also shows what compound interest would have produced, because the gap is the clearest way to understand why compounding matters.
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Where simple interest actually appears
It is less common than compound interest but not rare. Short-term personal loans, some car finance, certain bonds paying a fixed coupon, and many informal agreements between people use it. Its appeal is that it is easy to verify: the same amount of interest accrues every period, forever.
The gap widens with time
Over one year, simple and compound interest are identical at the same rate. Over three years the difference is small. Over twenty it is large, and over forty it dominates. The extra figure shown here is exactly that gap, and watching it grow as you extend the term is the fastest way to internalise why long horizons matter.
Check which one you are being quoted
If a lender advertises a flat or simple rate on an instalment loan, the effective APR is usually considerably higher than the quoted number, because you repay progressively but interest was calculated on the full original amount. Comparing a flat rate against an APR directly will mislead you.
Frequently asked questions
When is simple interest better for the borrower?
Always, at the same rate and term. Interest never accrues on interest, so the total cost is lower.
Is a car loan simple or compound interest?
Most amortising car loans in the United States accrue interest on the outstanding balance, which behaves like compound interest even though the rate is quoted annually. Some agreements use precomputed interest, which changes what early repayment saves.
How do I convert a flat rate to an APR?
There is no clean shortcut — it depends on the repayment schedule. As a rough guide, a flat rate on an evenly amortising loan corresponds to an APR close to double it.