Simple interest
Interest = P × r × t · Total = P + Interest
Interest is charged only on the original principal P — never on accumulated interest — so the balance grows in a straight line. r is the annual rate (as a decimal) and t the time in years. Most short-term loans, car loans and bonds use simple interest; savings and credit cards use compound.
Simple interest, explained
Simple interest is the most straightforward way to price the cost of borrowing or the return on a deposit. It uses the formula I = P × r × t and, unlike compound interest, never charges interest on previously earned interest.
Drag the principal, rate, and time sliders and the split bar shows how much of your total repayment is the original principal versus the interest cost.
For information only; not financial advice.