Simple & Compound Interest Calculator

Principal, rate, time — choose simple or compound (with the compounding frequency) and see the final balance and exactly how much of it is interest.

Free — no signup Runs in your browser Pairs with the Promissory Note
Worked example

$10,000 at 6% for 3 years — both methods, side by side

Example: $10,000 · 6%/year · 3 years

Simple interest earns only on the original principal; compound interest earns on the growing balance. On the same loan the difference is real money:

Simple   = $10,000 × (1 + 0.06 × 3) = $11,800.00
Compound = $10,000 × (1 + 0.06/12)36 = $11,966.81  (monthly)
Difference = $166.81 more under monthly compounding

The compounding frequency matters too: the same 6% compounds to $11,910.16 annually but $11,966.81 monthly. When you write a loan, the note should say both the rate and how it compounds — “6% per year, simple” and “6% compounded monthly” are different loans.

FAQ

Interest questions

Simple interest is calculated only on the original principal: I = P × r × t. Compound interest is recalculated on the growing balance each period, so interest earns interest. Over short terms the gap is small; over years it widens fast — that’s the “compounding” everyone talks about.
Most person-to-person promissory notes use simple interest because it’s easy to verify by hand, while bank products (savings, credit cards, mortgages) compound. Either is legal in a private note — what matters is that the note states the method explicitly.
Each step up (annual → quarterly → monthly → daily) adds a little more, with diminishing returns: at 6% for 3 years on $10,000, annual compounding yields $11,910 and daily $11,972. The rate itself matters far more than the frequency, but a note should still name the frequency to avoid disputes.
Yes — state usury laws cap rates on private loans, with limits and carve-outs that vary widely by state and loan type. A rate above the cap can make the interest (and in some states the whole loan) unenforceable. Check your state’s limit before setting a rate in a note.

This calculator provides general estimates for planning purposes and is not legal, tax, or financial advice. Usury caps vary by state; this tool does not check your rate against them.

The math is settled.
Now document the loan.

BizDocs writes a promissory note that locks in the principal, the rate, and the interest method — so the number you calculated is the number that holds up.

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