Simple Interest Calculator
Simple interest accrues only on the initial amount and is never added to it, so every period earns exactly the same amount. This calculator shows how much interest you will accumulate at a fixed rate and what the final balance will be. Use it for short-term loans, deposits without capitalisation, fixed-coupon bonds and late-payment interest. Below are the formula, a worked example with real numbers and the practical limitations.
Formula and explanation
I = P · r · t | A = P · (1 + r · t)
where: P = principal (initial amount), r = annual interest rate, t = term in years, I = accrued interest, A = final amount.
Simple interest is calculated only on the initially invested amount (the principal), without taking into account the interest accrued over the period. It is most often used for short-term loans, deposits and some bonds. The calculator shows how much interest you will accumulate over a given period at a fixed interest rate.
Methodology
What the simple interest calculator works out
Simple interest is the most direct way to measure the cost of money over a period. Interest accrues on the initial amount only — the principal — and is never added to it. Every year earns exactly what the first year earned, because the basis of the calculation never changes.
You will meet this method in short-term corporate lending, in deposits without capitalisation, in fixed-coupon bonds where the coupon is paid out rather than reinvested, in instalment plans with a one-off mark-up, and in statutory late-payment interest on commercial and tax obligations. Use the calculator whenever the contract states that interest accrues on the principal rather than on the growing balance.
If interest is capitalised — added to the principal so that it starts earning interest of its own — the arithmetic is different and the final figure is higher. For those cases use the compound interest calculator.
The formula explained in words
Accrued interest equals the principal multiplied by the annual rate and by the term in years: I = P · r · t. The final amount adds that interest to the principal: A = P · (1 + r · t).
- P — principal. The amount you deposit or borrow at the start. It stays unchanged throughout the term.
- r — annual interest rate. Entered as a percentage but used in the formula as a decimal: 4.5% means 0.045.
- t — term in years. Periods shorter than a year go in as a fraction. Six months is 0.5 years; 90 days is roughly 0.2466 years on a 365-day basis.
- I — accrued interest for the whole period, and A — the final amount you will receive or owe.
Over short terms the day-count convention also matters — the way the contract converts days into years. The common ones are ACT/365 (actual days over 365), ACT/360 (actual days over 360, typical in interbank and corporate lending) and 30/360 (every month counted as 30 days). On €20,000 at 3.5% for 90 days, ACT/365 gives €172.60 while ACT/360 gives €175.00. The gap is trivial on one transaction and material on rolling working-capital finance.
A worked example
You place €25,000 in a term deposit at a fixed 4.5% per year for 3 years, without capitalisation — the interest is paid out separately rather than added to the deposit.
- Convert the rate to a decimal: r = 4.5% = 0.045.
- Calculate the interest: I = 25,000 × 0.045 × 3 = €3,375.00.
- Calculate the final amount: A = 25,000 × (1 + 0.045 × 3) = 25,000 × 1.135 = €28,375.00.
| Year | Interest-bearing base | Interest for the year | Cumulative interest |
|---|---|---|---|
| 1 | €25,000.00 | €1,125.00 | €1,125.00 |
| 2 | €25,000.00 | €1,125.00 | €2,250.00 |
| 3 | €25,000.00 | €1,125.00 | €3,375.00 |
The base stays at €25,000 in all three years — that is precisely what separates simple from compound interest. For comparison, had the same deposit been capitalised once a year, the final amount would have been 25,000 × 1.045³ = €28,529.15, or €154.15 more. Over three years the difference is modest, but it grows quickly with a longer term and a higher rate.
Practical guidance and the Bulgarian context
When comparing offers, look past the headline rate to the annual percentage rate of charge (APRC) on loans and the effective annual rate on deposits. Those two figures capture fees and capitalisation frequency respectively, while the nominal rate on its own tells you very little.
Tax treatment affects the outcome. Individual income in Bulgaria is generally taxed at a flat 10%, while interest on bank accounts and deposits is subject to a final withholding tax whose current rate is worth checking against the version of the Personal Income Taxes Act in force before you build a net yield into your plan. The calculator works with gross figures; tax is deducted on top.
Simple interest also underpins statutory late-payment interest, which is set as the Bulgarian National Bank base rate plus a margin fixed by Council of Ministers decree and accrues on the outstanding principal for the days of delay. If you are quantifying a claim on an unpaid invoice, check the base rate applicable to that period — it is revised twice a year.
Limitations of the calculation
The calculator assumes the rate is fixed for the whole term. With a floating rate tied to a market index the result is indicative only and should be recalculated at every reset.
Arrangement and servicing fees, insurance, commissions and taxes are excluded. So is inflation: €28,375 in three years buys less than €28,375 does today — for real purchasing power, use the inflation calculator.
Finally, the model does not fit revolving products such as credit cards and overdrafts, where interest accrues on a changing daily balance, nor amortising loans, where the principal falls with every instalment. For those, use the loan calculator with an amortisation schedule.
Frequently asked questions
What is the difference between simple and compound interest?
With simple interest the base stays at the original principal for the whole term, so every year earns the same amount. With compound interest the accrued interest is added to the principal and starts earning in its own right. On €25,000 at 4.5% for 3 years, simple interest gives €28,375 while annual compounding gives €28,529.15. The longer the term, the wider the gap.
How do I calculate simple interest for less than a year?
Enter the term as a fraction of a year. Six months is 0.5, three months is 0.25, and an exact number of days is divided by the day-count basis in the contract — usually 365 or 360. For 90 days on a 365-day basis you get 90 ÷ 365 = 0.2466 years. Check which day counts as the first and last, since conventions differ.
Which products use simple interest in Bulgaria?
Most often short-term lending between companies, deposits without capitalisation, bonds whose coupon is paid out, instalment plans with a one-off mark-up, and statutory late-payment interest on invoices and tax liabilities. Consumer and mortgage loans almost always run on an amortisation schedule with a falling principal, for which simple interest is not the right model.
Does the calculator include taxes and fees?
No. The result is gross — it shows interest accrued at the contractual rate, before arrangement and servicing fees, insurance and tax. Individual income in Bulgaria is generally taxed at a flat 10%, while interest on bank deposits carries a final withholding tax whose current rate should be checked against the Personal Income Taxes Act in force. Deduct the tax due to arrive at your net figure.
Does the result account for inflation?
No. The final amount is in nominal euros. If average annual inflation is close to your interest rate, the real purchasing power of your money is barely changed despite the interest earned. To see the real return, use the inflation calculator and the Fisher formula, which sets the nominal rate against inflation over the same period.
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The calculators are for guidance only and do not constitute financial, tax or legal advice. Parameters reflect 2026 legislation and should be verified annually. For a specific case, book a consultation with our specialists.