You enter the principal amount, the annual interest rate as a percentage, and the time in years. The tool applies the simple interest formula: I = P × r × t, where P is principal, r is the annual rate as a decimal, and t is time in years. It then adds the interest to the principal for the total amount. No compounding is applied.
Simple interest is common for short-term loans, auto loans, some personal loans, Treasury bills, and certificates of deposit that pay interest at maturity rather than reinvesting it. Most savings accounts and mortgages use compound interest instead.
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus any previously earned interest. Over time, compound interest grows exponentially while simple interest grows linearly.
Yes — just convert months to a decimal. For example, 6 months is 0.5 years, 18 months is 1.5 years. The formula works with any fractional time period.
No. Interest income is generally taxable as ordinary income in the U.S. Your actual after-tax return depends on your federal and state tax bracket. Consult a tax professional for your specific situation.
Estimate only. Results reflect your inputs and standard formulas. Double-check important decisions independently.