Simple Interest Calculator
Work out interest calculated only on the original principal, not on interest already earned.
- Total value
- $16,000
This calculator provides estimates only. It is general information, not financial or taxation advice, and doesn't account for your full personal circumstances. Confirm figures with your lender or a licensed adviser before making a decision.
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How this calculator works
Simple interest is calculated only on the original principal for the whole period — unlike compound interest, the interest you earn doesn't itself start earning interest. It grows in a straight line rather than accelerating over time, using the formula I = P × r × t, where P is the principal, r the annual rate, and t the number of years.
Enter the principal, the annual rate, and the time period to see the interest earned and the total value at the end.
Worked example: $10,000 at 6% p.a. simple interest over 10 years earns exactly $6,000 in interest (10,000 × 0.06 × 10), for a total of $16,000 — compare that to $8,193.97 in interest over the same period if it compounded monthly instead.
Simple interest shows up in some fixed-term loan and bond structures, short-dated bank bills, and back-of-envelope estimates, but most everyday savings accounts and term deposits in Australia actually compound. Use this calculator to understand the concept or check a product that explicitly states simple interest terms — otherwise the compound interest calculator will be more representative.
Frequently asked questions
- Where would I actually encounter simple interest?
- Some short-term loans, certain bonds, and some fee or penalty calculations use simple interest. Most everyday bank savings products and term deposits compound instead, so check your product's terms before assuming one or the other.
- Why is simple interest lower than compound interest over time?
- Because compound interest earns returns on previously earned interest as well as the principal, while simple interest only ever earns on the original principal — the gap between them widens the longer the money is invested.
- Does this apply to loans as well as investments?
- The same formula works either way — as interest earned if you're investing, or interest owed if you're borrowing under a simple-interest loan structure. Most Australian mortgages and personal loans use amortising (compound-style) interest instead — see the mortgage repayment calculator for that.