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Interest calculator
How much interest an amount earns or costs, with simple interest and compared with compounding.
Simple interest is principal × rate × time. $10,000 at 5% for 5 years earns $2,500, for a total of $12,500. Compounded yearly, the same rate would earn $2,763.
Simple interest
$2,500
$10,000 × 5% × 5 years = $2,500, for a total of $12,500.
Compounded yearly instead, the interest would be $2,763, $263 more.
| Year | Simple interest | Balance | Compounded yearly |
|---|---|---|---|
| 0 | $0 | $10,000 | $10,000 |
| 1 | $500 | $10,500 | $10,500 |
| 2 | $1,000 | $11,000 | $11,025 |
| 3 | $1,500 | $11,500 | $11,576 |
| 4 | $2,000 | $12,000 | $12,155 |
| 5 | $2,500 | $12,500 | $12,763 |
The formulas
Simple interest = P × r × t · Compound: P × (1 + r)t − P
P is the principal, r the yearly rate and t the time in years. Simple interest is paid only on the original amount; compound interest is also paid on interest already earned, so the gap grows with time.
Simple vs compound over time
$10,000 at 5% a year:
| Years | Simple interest | Compound interest (yearly) | Difference |
|---|---|---|---|
| 1 | $500 | $500 | $0 |
| 5 | $2,500 | $2,763 | $263 |
| 10 | $5,000 | $6,289 | $1,289 |
| 20 | $10,000 | $16,533 | $6,533 |
| 30 | $15,000 | $33,219 | $18,219 |
Where simple interest is used
Some car loans, short personal loans and Treasury bills work on simple interest; savings accounts, CDs and investments usually compound. For those, use the compound interest calculator or the APY calculator.
Questions people ask
How do you calculate simple interest?
Multiply the principal by the yearly rate and the number of years: $5,000 × 4% × 3 years = $600.
How much interest does 100k make a year?
At 4% simple interest, $100,000 earns $4,000 a year; at 5%, $5,000. Compounded monthly, 5% gives $5,116 in the first year.
How much interest on 1 million dollars per year?
$1,000,000 at 4% earns $40,000 of simple interest a year; at 5%, $50,000. The rates are examples; what an account pays changes with market rates.
Related
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Last reviewed by Asier Fernández, editor, on . Educational information only, not financial advice. How we calculate