Simple interest calculator

What is the simple interest formula?

I = P × r × t: principal times the yearly rate times the time in years. $5,000 at 4% for 3 years earns $5,000 × 0.04 × 3 = $600.

How is simple interest different from compound?

Simple interest is paid only on the original amount, so it grows the same every year. Compound interest also earns on past interest — the compound interest calculator shows the difference.

How do I use months or days?

Convert the time to years: 18 months is 1.5 years, and 90 days is 90 ÷ 365 years. Pick the unit and the calculator converts it.

Where is simple interest used?

Many car loans and personal loans charge interest on the outstanding balance this way, as do some bonds and short-term notes.

How do I find the rate or the time?

Rearrange the formula: r = I ÷ (P × t) and t = I ÷ (P × r). $600 on $5,000 over 3 years is 600 ÷ 15,000 = 4%.

What happens if the rate is monthly, not yearly?

The formula needs the rate and the time in the same period. A rate quoted per month must be multiplied by 12 to match a time in years, or the time must be counted in months. $1,000 at 1.5% per month for 6 months earns 1,000 × 0.015 × 6 = $90.00, the same as 18% a year for half a year.

Is the total amount the same as the interest?

No. The interest is only the charge for using the money; the total (the maturity value) is the principal plus the interest. In the 3-year example the interest is $600 and the total is $5,600.

The formula, variable by variable

Simple interest is I = P × r × t. P is the principal, the amount borrowed or invested. r is the annual rate written as a decimal (4% is 0.04), and t is the time in years. The total amount is A = P + I = P(1 + rt). Because only the original principal earns interest, the interest grows by the same dollar amount every year, which is why the table under the result rises in a straight line. The formula assumes the principal stays unchanged for the whole term: no extra deposits, no partial repayments and no interest added to the balance. As soon as interest is added back and earns interest itself, you are in compound-interest territory.

Worked example: $8,000.00 at 6.5% for 18 months

Convert the time first: 18 months is 18 ÷ 12 = 1.5 years. Convert the rate: 6.5% is 0.065. Then I = 8,000 × 0.065 × 1.5 = $780.00, and the total is $8,780.00. Entering 18 with the unit set to months gives the same figures.

Days: 365 or 360?

When the term is given in days, this calculator divides by 365. On $10,000.00 at 5% for 90 days that gives 10,000 × 0.05 × 90 ÷ 365 = $123.29. Some lenders and money-market instruments instead count a 360-day year, which would give $125.00 for the same loan. The difference is small on short terms, but it is a reason to ask which day-count convention your contract uses; the contract, not this page, decides what you owe.

Simple versus compound over a longer term

The gap between the two grows with time. $5,000.00 at 4% for 10 years earns $2,000.00 in simple interest. If the interest were added to the balance once a year, the same money would earn $2,401.22, which is $401.22 more. Over 1 year the two are identical, so the choice only matters for longer terms.

Common mistakes

Typing the rate as 0.04 instead of 4 makes the answer one hundred times too small, because the box expects a percent. Mixing units is the other frequent error: a time of 18 with the unit left on years means 18 years, not 18 months. Finally, a loan that you repay in installments charges interest on a balance that shrinks with each payment, so one P × r × t over the whole term overstates the cost; use the amortization calculator for those.

Sources: the formula I = Prt and the compound-interest comparison are standard financial mathematics (see the interest chapters of OpenStax Contemporary Mathematics); the day-count note reflects the common Actual/365 and Actual/360 conventions. Related: compound interest calculator, loan calculator and APR calculator. Estimates for planning only; not financial, tax or legal advice.

Estimates for planning only — not financial, tax or legal advice. Your lender's or employer's figures decide. How we check our calculators.