Simple Interest Calculator Formula & How It Works
SI = P × R × T | A = P + SI = P × (1 + R × T)
- SI = Simple Interest
- P = Principal amount
- R = Annual interest rate (as decimal: 8% = 0.08)
- T = Time in years
Simple interest is calculated only on the original principal — interest does not earn interest. It is used for short-term loans, some bonds, and savings accounts. For the same rate, compound interest always grows faster than simple interest because interest is added to the principal each period.