1. What is Simple Interest?

Simple interest is a method of calculating interest where the interest is computed only on the original principal amount throughout the loan term, with no compounding. This calculator is designed for loans with no payments (e.g., deferred loans).

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 in years (unitless)
• \( Interest \) — Total interest (USD)

Explanation: The formula calculates the total interest that would accrue on a loan where no payments are made during the loan term.

3. When to Use This Calculator

Details: This calculator is specifically designed for deferred loans or loans with no periodic payments. It's useful for short-term loans or situations where the borrower will pay the entire principal plus interest at maturity.

4. Using the Calculator

Tips: Enter the principal amount in USD, annual interest rate as a decimal (e.g., 0.05 for 5%), and time 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 original principal, while compound interest is calculated on the principal plus any accumulated interest.

Q2: Can I use this for loans with monthly payments?
A: No, this calculator is specifically for loans with no payments until maturity. For loans with regular payments, use an amortization calculator.

Q3: How do I convert APR to decimal?
A: Divide the percentage by 100 (e.g., 7.5% becomes 0.075).

Q4: Does this account for partial years?
A: Yes, you can enter fractional years (e.g., 1.5 for 1 year and 6 months).

Q5: What's the maximum time period I can calculate?
A: There's no technical limit, but simple interest is typically used for short-term loans (under 1 year).