Finance

Investment Simple Interest Total Calculator (5 Years)

Calculate simple interest and the total amount to repay. This investment version uses a 5-year planning term as its starting point.

The Interest figure is the extra cost of borrowing over 5 years, and the Total figure is the original amount plus that interest, so the full amount to repay is the Total, not just the amount borrowed.

Formula

Simple interest equals principal times rate times time, divided by 100.

How it works

Interest is charged only on the original principal, not on interest already added.

Worked example

Principal $10,000, annual rate 5%, term 5 years. Using the page formula, simple interest equals $10,000 times 5 times 5, divided by 100, which is $2,500.00. Total to repay is $10,000 plus $2,500.00, which is $12,500.00. That is the calculator's own output for these defaults.

Because simple interest never compounds, the interest grows by the same $500 every year: after 5 years it is 5 times $500, which is $2,500.00. After only 5 years the interest is still a quarter of the amount borrowed, which is why a short simple-interest loan can look cheap even though it costs $500 a year.

Who this term suits for an investor: an investor borrowing for a short, defined play, such as a bridge loan to buy, renovate and resell an investment property within about 5 years, where the loan must be cleared from the sale before interest eats the profit.

FAQs

What is simple interest?
Simple interest is interest charged only on the original amount, not on accumulated interest.

Is this investment calculator exact?
No, it is an estimate for planning only, based on the numbers you enter.

Are these figures financial advice?
No, they are estimates for planning only, not financial advice. Check with a qualified adviser for decisions involving large sums.

Is $2,500 of interest over 5 years a lot for a short investment loan?
It is a quarter of the amount borrowed, which is modest for a short loan but still $500 a year that the investment must earn back before it makes any profit.

Why is the interest exactly $500 a year here?
Because simple interest is charged only on the original $10,000: 5% of $10,000 is $500 every year, and it never grows, unlike compound interest.

Should an investor choose simple interest for a 5-year bridge loan?
It can suit a short bridge loan that will be repaid from a sale, but only if the sale price covers the $12,500 total plus fees and taxes, which this page does not count.

Estimates only, not financial advice. Figures are approximate and do not include all fees, taxes, or changing rates unless stated.