Simple Interest Calculator - Calculate Interest, End Balance, Principal, Rate & Term
Simple Interest Calculator
How to Use This Calculator
Balance Tab - Calculate Future Value
Use this when you know your initial investment, interest rate, and time period, and want to find out how much you'll have at the end.
- Enter your Principal amount (initial investment)
- Enter the Interest Rate and select if it's per year or per month
- Enter the Term and select if it's in years or months
- The calculator will show your final balance and total interest earned
Example: You invest $10,000 at 5% annual interest for 3 years. You'll earn $1,500 in interest for a total of $11,500.
Principal Tab - Calculate Required Initial Investment
Use this when you have a target amount you want to reach and need to know how much to invest initially.
- Enter your desired End Balance
- Enter the available Interest Rate and time period
- Enter the Term you want to invest for
- The calculator will show how much you need to invest initially
Example: You want $25,000 in 5 years with 4% annual interest. You need to invest $20,833 initially.
Term Tab - Calculate Required Time Period
Use this when you know how much you can invest and your target amount, and want to know how long it will take.
- Enter your target End Balance
- Enter your available Principal to invest
- Enter the available Interest Rate
- The calculator will show how long you need to invest
Example: To grow $15,000 to $20,000 at 6% annual interest, you need 5.56 years.
Rate Tab - Calculate Required Interest Rate
Use this when you know your investment amount, target amount, and time period, and want to know what interest rate you need.
- Enter your target End Balance
- Enter your available Principal
- Enter your investment Term
- The calculator will show what interest rate you need to achieve your goal
Example: To grow $12,000 to $18,000 in 4 years, you need a 12.5% annual interest rate.
Simple Interest vs. Compound Interest
| Aspect | Simple Interest | Compound Interest |
|---|---|---|
| Interest Calculation | Only on principal | On principal + accumulated interest |
| Growth Pattern | Linear growth | Exponential growth |
| Formula Complexity | Simple: A = P(1 + rt) | Complex: A = P(1 + r)^t |
| Common Usage | Short-term loans, some bonds | Savings accounts, most investments |
Common Applications
Simple interest calculations are commonly used in:
- Short-term Loans: Personal loans, payday loans, and some auto loans
- Savings Bonds: U.S. savings bonds where you lend money to the U.S. government and earn interest
- Certificate of Deposits (CDs): Some CDs use simple interest calculations
- Promissory Notes: Simple lending agreements between individuals
- Government Securities: Treasury bills and certain government bonds
Example Calculations
Example 1: Car Loan
Scenario: You borrow $20,000 for a car at 6% simple interest for 3 years.
Calculation:
- Interest = $20,000 × 0.06 × 3 = $3,600
- Total Amount = $20,000 + $3,600 = $23,600
- Monthly Payment = $23,600 ÷ 36 = $655.56
Example 2: Certificate of Deposit
Scenario: You invest $50,000 in a 2-year CD at 4% simple interest.
Calculation:
- Interest = $50,000 × 0.04 × 2 = $4,000
- Final Amount = $50,000 + $4,000 = $54,000
- Monthly Interest = $4,000 ÷ 24 = $166.67
Example 3: Investment Planning
Scenario: You need $100,000 in 8 years and can get 5% simple interest.
Calculation:
- Required Principal = $100,000 ÷ (1 + 0.05 × 8) = $71,428.57
- Total Interest = $100,000 - $71,428.57 = $28,571.43
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