Canada Simple interest calculator

Simple interest, explained

Simple interest is calculated on the original principal only: I = P × r × t. The interest never joins the balance, so it never earns interest itself — growth is a straight line. Compound interest recalculates on the growing balance, producing the exponential curve that dominates over long periods.

Worked example

$10,000 at 5% for 10 years:

• Simple: $10,000 × 0.05 × 10 = $5,000 interest → $15,000 total
• Compound (annual): $10,000 × 1.05¹⁰ − $10,000 = $6,289 → $16,289 total
• Stretch to 30 years and the gap explodes: $15,000 simple vs $33,219 compound

Where you'll meet simple interest

• Car loans and many personal loans — interest accrues daily on the outstanding balance (simple-interest method), which is why paying early or paying extra saves real money.
• Bond coupons — a bond pays a fixed percentage of face value; the coupon doesn't compound unless you reinvest it.
• Some short-term deposits — certificates that pay interest only at maturity.
• Late-payment penalties and some court-ordered amounts — statutory interest is often simple.

The practical takeaway

When you're the saver, you want compounding — see the compound interest calculator for the full effect with regular contributions. When you're the borrower, simple daily interest is your friend: every early payment shrinks the balance interest is charged on from that day forward.