Simple Interest Calculator

Simple interest is a quick and easy method of calculating the interest charge on a loan or principal amount. It is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments. Unlike compound interest, it does not factor in the effect of "interest on interest."

When is Simple Interest Used?

Simple interest is most commonly used for short-term loans or financial products. Some common examples include:

• Car Loans: Many auto loans use simple interest, where interest is calculated on the loan balance daily.
• Short-Term Personal Loans: Payday loans or other short-term credit often use this method.
• Certificates of Deposit (CDs): Some savings instruments like CDs pay out simple interest.

For long-term investments, such as retirement funds or mutual funds, compound interest is far more common and beneficial for the investor.