ClarityHow to use this tool
- Enter principal, annual rate, term.
- Select Calculate to view the result.
- Check the method and assumptions below before using the result.
Input reference and sample values
Use the units and choices shown for each field. Sample values are provided for practice, not as recommendations.
| Input | Format and units | Sample |
|---|---|---|
| Principal | Numeric value. Unit: money. Zero or positive. | 1000 |
| Annual rate | Numeric value. Unit: %. Zero or positive. Maximum: 1000. | 5 |
| Term | Numeric value. Unit: years. Zero or positive. Maximum: 1000. | 3 |
Result for these sample inputs
150 currency units
- Final balance
- 1150
- Principal
- 1000
Simple interest earned; interest is not added to the principal during the term.
Select Try the example in the form to load these values and calculate them again. This replaces the current form inputs. Compare the result with the method and worked explanation below.
The method, explained
Interest = principal × annual rate ÷ 100 × years. Final balance = principal + interest. Unlike compound interest, interest is not added to the amount earning interest.
A principal of 1,000 at 5% per year for 3 years earns 150. The final balance is 1,150.
Understanding your result
Simple interest is calculated from the original principal. Compare this result with compound interest only when the rate and time basis are the same.
What to keep in mind
Assumes a constant rate and no principal repayments, fees or taxes. Enter 0.5 years for six months. Actual contracts may use specific day-count conventions.
Common questions
How does this differ from compound interest?
Simple interest always uses the original principal. Compound interest can earn further interest on earlier interest.
Can I use it for a repayment loan?
Not directly. A loan with a declining balance needs its actual repayment schedule; this tool keeps the principal constant.
Methodology maintained by ClarityKit. How these tools are built and checked.