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Simple interest calculator

Calculate maturity payout, after-tax amount, and real value for simple interest products like fixed deposits. Instantly compare with compounding.

Inputs

Payout modeLump sum
Total interest
$50.0K
$50,000
Maturity payout
$150.0K
$150,000
After-tax payout
$142.5K
Tax $7.5K
Real value (after tax)
$111.0K
Inflation adjusted

Simple vs Compound (after tax)

SimpleCompoundPrincipal
If compounded same terms
Final value +$14.7K more
Compound $164.7K vs Simple $150.0K
Compound calculator

How the simple interest calculator works

Simple interest means 'interest accrues only on the principal.' This tool adds the same fixed interest every month, simulates both lump-sum-at-maturity and monthly payouts, then charts the same scenario compounded for comparison. Below we walk through the mechanics, a real example, how Korean interest tax is handled, and the common misconceptions to avoid.

How simple interest works — the monthly interest is constant

The core formula is interest = principal × annual rate × years. This calculator generates 'principal × (annual rate ÷ 12)' of interest each month, and because the principal never grows, the monthly interest stays identical from start to finish. Since interest never earns interest of its own, the balance grows in a straight line, and the slope is set solely by the rate and the principal. Choosing 'lump sum at maturity' accrues all interest and pays it once at the end; choosing 'monthly payout' pays that month's interest each month. Both deliver the same total interest — the only difference is when you receive it. That predictability makes simple interest the natural starting point for understanding products that pay a fixed coupon, like term deposits and bonds.

A real example — ₩100M principal, 4% annual, 3 years

Suppose you deposit ₩100M at 4% simple interest for 3 years. The monthly interest is ₩100M × (4% ÷ 12) ≈ ₩333,000, identical for all 36 months, and total interest is ₩100M × 4% × 3 years = ₩12M. Whether you take principal-plus-interest of ₩112M once at maturity or ₩333,000 each month, the pre-tax total is the same. Had the same ₩100M been compounded monthly, it would reach about ₩12.73M — roughly ₩730,000 more than simple interest. That gap widens quickly the longer you stay invested, so use the calculator's compound-comparison chart to see what a simple-interest product is costing you. Keep in mind too that the same ₩12M paid once at maturity leaves no chance to grow it in the meantime, whereas taking it monthly and reinvesting immediately effectively moves you closer to compounding.

Korean interest tax of 15.4% — read it after tax

Deposit and savings interest is taxed before you receive it. This calculator multiplies cumulative interest by the rate you enter, deducts it, and shows the after-tax amount. Korean deposit interest is usually withheld at 15.4% (14% income tax + 1.4% local tax), which makes a sensible default. On the ₩12M interest above, about ₩1.85M is taken as tax, leaving roughly ₩10.15M. For tax-free, tax-advantaged, or ISA accounts, set the rate to 0% or 9.9% to compare. Note that if your annual financial income (interest + dividends) exceeds ₩20M, it becomes subject to global taxation and a heavier burden, so spreading maturities can help for large sums. Separately, real value divides the after-tax amount by (1 + inflation ÷ 12) each month to express purchasing power in today's money — if inflation approaches your rate, your real return can converge toward zero or even turn negative.

Common mistakes and tips

The most common error is treating simple and compound interest as the same. The gap is small over short periods, but compound pulls far ahead beyond five years, so always check the comparison chart for long maturities. Second is reading only the headline rate and ignoring tax — a '4%' rate is about 3.38% after tax, so capturing a tax-free allowance can matter more than 0.5 percentage points of rate. Third is assuming 'monthly payout' is more profitable: both methods yield the same pre-tax total interest, and a difference only appears if you reinvest the monthly cash elsewhere. Use this calculator for simple-interest products like term deposits and bonds, and check installment investing separately with the compound calculator.

FAQ

What is the difference between simple and compound interest?

Simple interest accrues only on the principal. At 5% simple interest on ₩100M, you earn exactly ₩5M per year every year. Compound interest earns interest on accumulated interest too, growing faster over time. The gap is small for short terms but can reach 1.5–2× over 30 years.

What is the difference between lump sum and monthly payout?

Lump sum accrues interest and pays it all at maturity; monthly payout distributes each month's interest as it accrues — useful for steady cash flow. The total interest is the same for both, but monthly payout has tax withheld each month.

How do I calculate fixed-deposit interest?

Fixed-deposit interest = principal × annual rate × (months ÷ 12) on a simple basis. Example: ₩10M at 3.5% for 1 year gives ₩350K pre-tax, about ₩296K after the 15.4% tax. Enter principal, rate, and term here to see pre-tax, after-tax, and real value instantly.

Is the 15.4% Korean interest tax correct?

For standard deposits and savings, 14% income tax + 1.4% local tax = 15.4% is automatically withheld. Tax-exempt comprehensive savings, ISA interest within the ₩2M/₩4M limits, and special credit-union deposits use different rates — check the product terms before opening.

Which products use simple interest?

Most fixed deposits, recurring deposits, CDs, and MMFs quote interest on a simple basis. Rolling interest back into the same product at maturity creates a compounding effect. Bond coupons are also simple; for recurring deposits, each monthly installment sits for a different period, so the effective yield is below the headline rate.

How much more does compounding earn?

At ₩100M / 5% / 10 years: simple ≈ ₩150M (₩50M interest), monthly compound ≈ ₩165M (₩65M interest). Over 30 years: simple ≈ ₩250M vs compound ≈ ₩448M — nearly 2×. Compare instantly using the chart and box on this page.

How much is protected by deposit insurance?

Under Korea's Depositor Protection Act, principal plus interest is protected up to ₩50M per person per financial institution (as of 2025; a raise to ₩100M is scheduled). Deposits and principal-guaranteed products qualify; investment products (funds, ELS) are excluded. Spread amounts above the limit across institutions.

Which earns more interest, a deposit or a recurring deposit?

At the same headline rate, a fixed deposit pays more than a recurring deposit. A deposit holds the full amount from day one, while a recurring deposit is paid in monthly, so the average holding period is about half and the effective yield is roughly 55% of the headline rate. Use a deposit for a lump sum, a recurring deposit while you save up.

How do I find the after-tax interest?

Subtract the 15.4% interest income tax from pre-tax interest. Example: ₩1M pre-tax interest loses ₩154K in tax, leaving about ₩846K. This calculator applies your entered rate automatically and shows pre-tax, tax, and after-tax amounts separately, so no manual math is needed.

Does inflation make deposits a loss?

If the after-tax deposit rate is below inflation, real purchasing power falls. Example: a 3% deposit has an after-tax rate of about 2.54%, so with 3% inflation the real return is negative. Enter your expected inflation in the field above to see the real value of the maturity amount.

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This calculator is for informational purposes only. Actual tax and interest rates vary by product type and individual circumstances. Consult a tax advisor or financial professional for important decisions.