Simple Interest Calculator
Interest on the principal only — no compounding.
Reviewed by the Calculation Machine team · Updated 24 October 2026 · How we check our maths
Your values
ⓘ Live results
- Interest
- $750.00
- Final balance
- $5,750.00
- Interest per year
- $250.00
Working
- 1I = $5,000.00 × 0.05 × 3 = $750.00
Quick answer
Simple interest is interest charged or earned only on the original principal, never on interest already added. Multiply the principal by the annual rate (as a decimal) and the time in years: I = P × r × t. A $5,000 loan at 5% for 3 years costs $5,000 × 0.05 × 3 = $750 in interest, so $5,750 is repaid in total.
What the Simple Interest calculator does
This calculator works out simple interest, the final amount owed or earned, and the interest per year. Enter any principal, an annual percentage rate and a time in years — fractions are fine, so six months is 0.5.
Simple interest is used for many short-term loans, some personal and auto loans, promissory notes between family members, Treasury bills and bond coupons, and in schoolwork as the first step before compounding. Because interest never earns interest, the amount grows in a straight line: each year adds the same dollar amount.
For savings accounts, CDs and most investments, interest compounds, so simple interest understates what you would earn over several years — use the compound interest calculator for those. For a loan you repay in monthly installments, the loan payment calculator shows the payment and total cost.
The formula
I = P × r × t; A = P + I = P × (1 + r × t)
| Symbol | Meaning | Unit |
|---|---|---|
| I | Interest earned or owed | $ |
| P | Principal — the amount borrowed or deposited | $ |
| r | Annual interest rate as a decimal (5% = 0.05) | per year |
| t | Time in years (months ÷ 12, or days ÷ 365) | years |
| A | Final amount: principal plus interest | $ |
This is the standard simple interest formula found in any financial mathematics textbook. Rearranged, it finds any missing value: P = I ÷ (r × t), r = I ÷ (P × t) and t = I ÷ (P × r). It assumes the principal stays the same for the whole period; if you repay part of a loan along the way, interest on the remaining balance falls.
Worked examples
Three-year personal loan
You borrow $5,000 at 5% simple interest and repay it all at the end of 3 years.
Inputs
- Principal5000 $
- Annual rate5 %
- Time3 years
Result
- Interest$750.00
- Final balance$5,750.00
- Interest per year$250.00
Interest is $750, or $250 a year, so you owe $5,750. Repaying in installments instead would lower the total interest, because the balance would shrink over time.
Six-month short-term loan
A small business borrows $12,000 at 8% a year for six months.
Inputs
- Principal12000 $
- Annual rate8 %
- Time0.5 years
Result
- Interest$480.00
- Final balance$12,480.00
- Interest per year$960.00
Interest for half a year is $480 — half of the $960 a full year would cost. Enter time as a fraction of a year when the term is in months.
Bond coupons
You hold $10,000 face value of a bond paying 4.25% a year and spend the coupons rather than reinvesting them, for 2 years.
Inputs
- Principal10000 $
- Annual rate4.25 %
- Time2 years
Result
- Interest$850.00
- Final balance$10,850.00
- Interest per year$425.00
You collect $425 a year, $850 in total. Because the coupons are taken out, they earn nothing further — exactly the simple interest model.
Simple vs compound interest on $10,000 at 5%
In the first year the two are identical. After that, compound interest pulls ahead because each year's interest also earns interest. The gap is small over a few years and large over decades.
| Years | Simple interest | Compound interest | Difference |
|---|---|---|---|
| 1 | $500 | $500 | $0 |
| 5 | $2,500 | $2,762.82 | $262.82 |
| 10 | $5,000 | $6,288.95 | $1,288.95 |
| 20 | $10,000 | $16,532.98 | $6,532.98 |
| 30 | $15,000 | $33,219.42 | $18,219.42 |
Converting months and days into years
The rate is per year, so time must be in years too. This is the most common mistake with the formula.
- Months: divide by 12. 18 months = 1.5 years; 9 months = 0.75.
- Days (actual/365): divide by 365. $10,000 at 6% for 90 days earns $10,000 × 0.06 × 90 ÷ 365 = $147.95.
- Days (banker's rule, actual/360): some commercial loans and money-market instruments divide by 360, which gives slightly more interest — $150.00 in the same example. Check your loan agreement for the day-count convention.
- Rate per month: if a lender quotes 1.5% a month, the annual rate is 18%.
Where simple interest is still used
- Auto loans and some personal loans: many are "simple interest loans", meaning each payment covers the interest accrued on the current balance since the last payment. Paying early or extra reduces total interest.
- Treasury bills and short-term notes: interest is effectively simple over terms of a year or less.
- Bond coupons: a bond pays a fixed percentage of face value each year.
- Informal and family loans: a flat rate on the amount lent is easy for both sides to check.
Credit cards, mortgages and savings accounts compound, so the APR or APY is the figure to compare for those.
How to use the Simple Interest Calculator
- 1Enter the principal — the amount borrowed, lent or deposited.
- 2Enter the annual interest rate as a percentage; convert a monthly rate by multiplying by 12.
- 3Enter the time in years, using decimals for months or days (6 months = 0.5).
- 4Read the total interest, the final balance and the interest earned each year.
Frequently asked questions
How do you calculate simple interest?
Multiply principal by the annual rate and by the time in years. For $2,000 at 6% for 4 years: 2,000 × 0.06 × 4 = $480.
How do I find the rate if I know the interest?
Rearrange the formula: r = I ÷ (P × t). If $1,000 earns $90 over 2 years, the rate is 90 ÷ 2,000 = 0.045, or 4.5% a year.
Is simple interest better than compound interest?
For a borrower, yes — you pay less over time. For a saver, compound interest is better because earnings grow faster.
Does simple interest apply to monthly payments?
On a simple interest loan, interest accrues daily on the outstanding balance, so each monthly payment reduces future interest. The I = Prt total only applies if the whole principal is repaid at the end.
What is the difference between interest and the final amount?
Interest is just the extra paid or earned. The final amount, or maturity value, is the principal plus that interest.
References
- Mathematics of Finance (Brown & Kopp) — McGraw Hill
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau
About this calculator
- Built and reviewed by the Calculation Machine team · How we build and test calculators
- Last reviewed: October 24, 2026
- Report an error