1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan based on the original principal amount, the interest rate, and the time period.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period (years)

Explanation: The formula calculates the total interest by multiplying the principal amount by the interest rate and the time period.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps borrowers estimate loan costs and compare different loan options effectively.

4. Using the Calculator

Tips: Enter principal amount in USD, annual interest rate as decimal (e.g., 0.05 for 5%), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: How do I convert APR to decimal?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).

Q3: Is this calculator suitable for mortgage loans?
A: Most mortgages use compound interest, so this calculator provides simplified estimates only.

Q4: Can I calculate monthly interest with this?
A: Yes, by entering time as a fraction of year (e.g., 6 months = 0.5 years).

Q5: What are typical interest rates for house loans?
A: Rates vary but typically range from 3% to 8% annually depending on market conditions and creditworthiness.