Simple Interest
Simple interest is calculated only on the original principal, never on interest already earned or owed. $1,000 at 5% simple interest earns exactly $50 a year, every year. It's the opposite of compound interest, where earnings themselves start earning.
Most auto and personal loans are simple-interest loans, meaning interest accrues daily on the balance still outstanding. That structure works in your favour in a specific way: paying a few days early, or paying anything extra, immediately reduces the balance tomorrow's interest is calculated on. The textbook formula — principal × rate × time — gives $6,000 on $20,000 at 6% over five years, but that assumes the full $20,000 stays outstanding the whole time. On a real amortising loan the balance falls with every payment, so the same loan costs about $3,199. The structure to avoid is precomputed interest, sometimes called the Rule of 78s, where the total is fixed at signing and paying early saves far less than it should.
Put it to work
Compound Interest Calculator
See how your savings grow with compound interest and monthly contributions — final balance, interest earned, and a year-by-year growth table.
Loan Calculator
Calculate the monthly payment, total interest, and payoff date for any personal, auto, or fixed-rate loan — and see how extra payments shorten it.
Auto Loan Calculator
Car payment with the real numbers: sales tax, fees, trade-in credit — even negative equity. See the monthly payment and the true total cost.