Simple Interest Calculator
Written by Thierno Sadou Diallo, formula verified per our methodology • Last checked on 9/5/2026
Simple interest is calculated with I = capital × annual rate × time in years. For €1,000 deposited at 5% for 3 years, the interest comes to €150, for a final balance of €1,150.
Explanation
Unlike compound interest, where interest already earned is added back to the capital and itself starts earning interest, simple interest is calculated each period on the original capital alone, which never changes for the whole term of the deposit. The interest earned is therefore identical every year: with a capital of €1,000 at 5%, you earn exactly €50 a year, every year, with no acceleration effect. It's a simpler calculation, but less advantageous over the long run than compound interest, once the term extends beyond a single period. It's still used for some short-term loans, fixed-coupon bonds, or simplified financial calculations. For a deposit where interest compounds (the vast majority of real-world savings accounts), see our compound interest calculator, which will give a higher result over the same term.
Example: €1,000 deposited at 5% for 3 years
Inputs
Initial capital: €1,000. Annual rate: 5%. Term: 3 years.
Calculation
Interest = 1,000 × 0.05 × 3 = €150. Final capital = 1,000 + 150 = €1,150.
Result
After 3 years, the capital reaches €1,150, including €150 of interest.
Frequently asked questions
What's the difference between simple and compound interest?
Simple interest is calculated only on the starting capital, which stays constant for the whole term. Compound interest adds interest already earned back into the capital, which therefore grows every period — generating more interest over time. For the same capital, rate, and term, compound interest always gives a result greater than or equal to simple interest once the term exceeds one period.
Where is simple interest still used in practice?
Some short-term loans, fixed-coupon bonds, or simplified financial calculations use simple interest. Most regulated French savings accounts (Livret A, LDDS) actually compound interest annually, which behaves more like compound interest over several years.
Does the rate I enter need to be an annual rate?
Yes, this calculator expects an annual rate and a term in years. For a term expressed in months, divide the number of months by 12 before entering it (for example, 18 months becomes 1.5 years).