A flat amount every period
Because simple interest only ever applies to the original principal, growth is linear, not accelerating. For most long-term savings and investing, compounding makes a much bigger difference — see the Compound Interest Calculator.
Frequently asked questions
What is simple interest?
Interest calculated only on the original principal, not on interest already earned — it grows by the same flat amount every period, unlike compound interest which accelerates.
Where is simple interest actually used?
Some personal loans, car loans and short-term notes use simple interest. Most savings accounts, investments and credit cards use compound interest instead.
How is it different from compound interest?
Simple interest = principal x rate x time, calculated once. Compound interest recalculates on a growing balance each period, so it earns "interest on interest" — see the Compound Interest Calculator for that version.
Last updated: June 2026