Simple Interest Calculator
Work out the interest on a loan or deposit that pays a fixed rate on the original amount only, with the I = P × r × t formula explained.
🔒 Runs entirely in your browser. Nothing you enter is sent to a server.
Simple interest is the most basic way to charge or earn interest: a fixed percentage of the original amount, every year, for as long as the money is borrowed or invested. It is easy to work out by hand, and this calculator does it instantly for any period in years, months or days.
How to use the simple interest calculator
- Enter the principal, the amount borrowed or invested.
- Enter the interest rate, and choose whether it is per year or per month.
- Enter the time and choose years, months or days.
You get the interest, the total amount, the interest for one year and, for comparison, what the same rate would earn with yearly compounding.
The simple interest formula
I = P × r × t
A = P + I- I is the interest
- P is the principal
- r is the annual rate as a decimal (6% = 0.06)
- t is the time in years
- A is the total amount at the end
Convert other time units to years first: months ÷ 12, or days ÷ 365. If the rate is quoted per month, multiply it by 12 to get the yearly rate.
Worked example
You lend a friend $5,000 at 6% simple interest a year for 3 years.
- I = 5,000 × 0.06 × 3 = $900
- A = 5,000 + 900 = $5,900
- Each year adds the same $300 of interest
With yearly compounding instead, the interest would be 5,000 × 1.06³ − 5,000 ≈ $955, about $55 more.
Example with days
A $1,000 short-term loan at 5% a year for 90 days:
- t = 90 ÷ 365 ≈ 0.2466 years
- I = 1,000 × 0.05 × 0.2466 ≈ $12.33
A lender using a 360-day year would charge 1,000 × 0.05 × 90 ÷ 360 = $12.50.
Rearranging the formula
The same formula answers other questions:
| You want | Formula |
|---|---|
| Interest | I = P × r × t |
| Principal | P = I ÷ (r × t) |
| Rate | r = I ÷ (P × t) |
| Time | t = I ÷ (P × r) |
For example, if $5,000 earned $900 in 3 years, the rate was 900 ÷ (5,000 × 3) = 0.06, or 6%.
Simple versus compound over time
The gap between simple and compound interest grows with time. On $5,000 at 6%:
| Years | Simple interest | Compound interest (yearly) |
|---|---|---|
| 3 | $900 | $955 |
| 10 | $3,000 | $3,954 |
After 10 years, compounding earns about a third more. That is why savers prefer compound interest and borrowers prefer simple interest.
Tips and pitfalls
- Check what the rate means. A “2% per month” loan is 24% a year in simple interest terms, which is very expensive.
- Flat-rate loans are not simple interest on the balance. Some lenders charge the full rate on the original amount for the whole term even as you repay it. The effective rate is then roughly double the quoted one.
- Mind the day count. For large amounts, 360 versus 365 days makes a real difference.
- Interest paid out is not reinvested. If a deposit pays simple interest, you can reinvest the payouts yourself to get the benefit of compounding.
Frequently asked questions
What is the formula for simple interest?
Interest = Principal × Rate × Time, often written I = P × r × t. The rate is a decimal per year (6% = 0.06) and the time is in years. The total you repay or receive is the principal plus the interest.
How is simple interest different from compound interest?
Simple interest is charged only on the original principal. Compound interest is also charged on interest that has already been added. Over short periods the difference is small, but over many years compound interest grows much faster.
How do I calculate simple interest for days?
Divide the number of days by 365 to turn it into years. Some banks and money markets divide by 360 instead, which gives slightly more interest. This calculator uses 365.
Where is simple interest used in real life?
Car loans in some countries, short-term personal loans, some bonds, certificates of deposit that pay out interest instead of reinvesting it, and many informal loans between people use simple interest.