Simple Interest Calculator

Calculate simple interest for loans or investments.

Principal ($)

Annual Rate %

Years

Results

Interest Earned

Principal $0

Final Amount $0

How to Use This Simple Interest Calculator

Our free simple interest calculator helps you calculate interest earned or paid on a principal amount. Simply enter the principal, annual rate, and time period to get instant results.

The simple interest formula is: Interest = Principal x Rate x Time. Unlike compound interest, simple interest does not add accumulated interest to the principal.

Frequently Asked Questions

What is simple interest?

Simple interest is interest calculated only on the principal amount, without compounding. The formula is: Interest = Principal x Rate x Time.

When is simple interest used?

Simple interest is commonly used for short-term loans, auto loans, and some mortgages. It is also used for Treasury bills and savings bonds.

How is simple interest different from compound interest?

Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus accumulated interest. Compound interest grows faster over time.

Simple interest is the most straightforward way to charge or pay for borrowing. The interest is computed once on the original principal, using the formula I = P × r × t, and the total amount repaid is A = P × (1 + r × t). It shows up in short-term loans, some auto loans, certain bonds, and informal lending between individuals. Because the interest is always calculated on the same base, the cost is easy to predict and easy to compare against offers that quote compound interest.

A quick example makes the formula concrete. Borrowing $5,000 at 6 percent simple interest for 3 years costs 5,000 × 0.06 × 3 = $900 in interest, with a total repayment of $5,900. The same terms on a compound basis would cost a little more, because interest added in earlier years would earn interest in later ones. For short durations the gap is small. Over 3 years at 6 percent, the difference is around $55; over 10 years on the same terms, it widens to several hundred dollars.

Simple interest is also the standard for some bond coupons. A 10-year, $10,000 bond with a 4 percent coupon pays $400 of interest each year, regardless of the bond's market price, and returns the $10,000 principal at maturity. Some short-term commercial loans use simple interest for the same reason: it is transparent, the payment is predictable, and the lender can describe the total cost in one line.

The calculator below takes the principal, the annual rate, and the time in years or months, then returns the interest, the total amount, and a year-by-year breakdown. Use it to size up a personal loan offer, a bridge loan, a short-term business credit line, or a private loan to a family member. When the same offer quotes compound interest, run it through the compound interest calculator for a like-for-like comparison.

How to use

Enter the principal, which is the amount of the loan or investment.
Enter the annual interest rate as a percentage (for example, 7, not 0.07) and the time period in years or months.
Click calculate to see the interest, the total amount owed or accumulated, and the year-by-year breakdown if available.
Re-run with a different rate or term to see how each lever changes the total interest, or compare side by side with the compound interest calculator.

Formula

Simple interest: I = P × r × t. Total amount: A = P × (1 + r × t). P is the principal, r is the annual rate as a decimal, t is time in years. Example: a $2,000 loan at 5% for 18 months (t = 1.5) costs 2,000 × 0.05 × 1.5 = $150 in interest, with $2,150 total.

Interpreting your results

The interest is the dollar cost (or earnings) over the period. The total amount is the headline number for the loan or deposit. The per-year interest stays constant under simple interest, which is the main reason it differs visually from compound calculations, where the interest grows each year. For a quick like-for-like comparison against a compound offer, the simple-interest figure is always the lower bound on the true cost.

Frequently asked questions

When is simple interest used instead of compound?

Simple interest is common for short-term consumer loans, auto loans, some mortgage calculations for partial periods, and most bond coupons. Compound interest shows up in savings accounts, credit cards, mortgages, and any product where interest rolls into the balance. The simple-interest calculation is also the default for many informal or private loans.

How do I convert between simple and compound interest?

There is no single conversion factor, since the gap depends on the rate, the time, and the compounding frequency. The cleanest method is to compute the same scenario under both formulas: simple A = P × (1 + r × t), and compound A = P × (1 + r/n)^(n × t). The dollar difference is the cost of compounding.

Is simple interest always cheaper than compound?

For a borrower, yes. Simple interest charges only on the original principal, so the total cost grows linearly with time. Compound interest charges on the principal plus accumulated interest, so it grows on itself. For a saver, the opposite is true: compound interest produces more earnings over time.

What time unit should I use?

The formula expects t in years. For months, divide the number of months by 12. For days, use 365 (or 360, in the U.S. 'banker's year' convention used in some loan agreements). Mixing units is the most common source of off-by-a-factor-of-12 errors, so the calculator exposes the unit clearly.