How it works
Simple interest is charged only on the original principal, never on accumulated interest.
Formula
I = P × r × t
Example
$5,000 at 5% for 3 years earns $750 in simple interest.
Assumptions & limitations
- Fixed rate and on-time payments.
- Excludes origination fees, late fees and penalties unless entered.
Frequently asked questions
When is simple interest used?
Some auto loans, short-term personal loans, and certificates of deposit use simple interest.