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Interest that doesn't compound: I = P × r × t. Common for short-term loans, some CDs, and bond coupons.
I = P × r × t, where r is the annual rate as a decimal and t is time in years. Interest is not reinvested.
Simple interest is calculated only on the original principal. Compound interest also earns interest on prior interest — so it grows faster.
Auto loans, some personal loans, Treasury bill discount, and traditional bond coupons (each coupon is on face value).
Compound interest — you want your interest to earn interest.
Simple interest — you don't pay interest on interest.
No — t can be any positive value, e.g. 2.5 years.
Results are estimates for educational purposes only and are not financial advice. Verify with a qualified professional before making decisions.
Last updated October 2026