Simple Interest Calculator

This simple interest calculator works out the interest on a loan or deposit from I = P × r × t, and it can solve for the principal, the rate or the time instead. Enter the time in years, months or days. You get the interest, the total amount, the formula with your numbers in it, a year-by-year table and a line showing what the same money would earn with yearly compounding.

How to use the simple interest calculator

1. Pick what you want to solve for: Interest (the default), Principal, Rate or Time.
2. Enter the principal — the amount borrowed or deposited. The default is $5,000.
3. Enter the annual interest rate as a percentage. The default is 4.5, meaning 4.5% per year.
4. Enter the time and choose its unit: years, months or days. Days are counted against a 365-day year.
5. If you are solving for the principal, rate or time, enter the interest amount you know in the interest field.

With the defaults, the answer is $675 of interest and a total of $5,675. The working line shows the substitution:

Below the result, the year-by-year table shows the balance growing by the same $225 every year (up to 50 rows), and the comparison line shows that the same $5,000 at 4.5% compounded yearly for 3 years would earn about $705.83 instead. That gap is the price of interest not earning interest, and it grows quickly with time.

The simple interest formula

Interest is a fixed share of the principal, charged once for every year the money is out. Multiply the principal by the yearly rate and you get one year of interest; multiply by the number of years and you have the whole amount. Nothing is added back to the principal along the way, which is what makes it “simple.” The simple interest formula guide goes through each piece of the formula and every rearrangement in more depth.

Two conversions trip people up, and the calculator does both for you:

• The rate goes in as a decimal. 4.5% is 4.5 ÷ 100 = 0.045. The percent to decimal calculator handles awkward rates such as 3⅞%.
• The time must be in years to match an annual rate. 18 months is 18 ÷ 12 = 1.5 years; 90 days is 90 ÷ 365 ≈ 0.2466 years.

The total you repay or collect at the end is the principal plus the interest:

Solving for principal, rate or time

You do not need to rearrange anything here: switch the calculator to Principal, Rate or Time, enter the interest you know, and it divides it out for you and prints the rearranged formula in the working. If you need to do it by hand, the guide walks through rearranging I = Prt for each unknown, and solves seven typical word problems step by step.

Worked examples

Simple interest vs compound interest

With simple interest the interest is always worked out on the original principal. With compound interest, each period’s interest is added to the balance and then earns interest itself. Over one year with yearly compounding the two are identical. After that, compound pulls ahead, slowly at first and then fast.

Here is $10,000 at 5% a year under each method:

Simple interest grows in a straight line: every year adds the same $500. Compound interest grows by the same percentage each year, which is why the gap more than doubles between years 20 and 30. If you want to see the growth as a percentage instead of dollars, run the start and end balances through the percentage change calculator.

Compound interest uses the formula A = P × (1 + r)ⁿ. The exponent is the whole difference; the exponent rules guide explains why repeated multiplication runs away from repeated addition.

Where simple interest is used

Simple interest shows up wherever interest is paid out or settled rather than left to build: many short-term personal and business loans, some auto loans that charge interest on the outstanding balance, certain bonds that pay a fixed coupon, and classroom problems. It also gives a quick lower bound for any compound-interest product — the true figure will be at least the simple-interest number.

Time in days and months: the 365 vs 360 question

The calculator counts days against a 365-day year, which is the exact method. Some lenders use a 360-day year instead (often called the banker’s rule), and that small change raises the interest:

Dividing by a smaller number gives a bigger result, so the 360-day convention always favors the lender. If your loan papers say “actual/360,” multiply the calculator’s answer by 365 ÷ 360 to match the lender’s figure.

Months are simpler: each month is one twelfth of a year, so 9 months is 0.75 years. A $1,500 balance at 8% for 9 months costs 1,500 × 0.08 × 0.75 = $90.

Common mistakes

• Entering the rate as a whole number in a hand calculation. 5,000 × 4.5 × 3 = 67,500 is out by a factor of 100. The rate must be 0.045. The percentage guide covers why “percent” means “divide by 100.”
• Mixing units. An annual rate with time in months gives an answer twelve times too large. Convert months to years first.
• Reporting the interest when the question asks for the total. “How much will you owe?” wants A = P + I, not I.
• Rounding the time too early. Use 90 ÷ 365 in full and round only the final dollar figure with the rounding calculator if needed.
• Assuming a savings account pays simple interest. Most deposit accounts compound, so their real earnings will be higher than the simple figure.
• Working backward with the total instead of the interest. To find the rate from “I repaid $4,300 on a $4,000 loan,” use the interest of $300, not $4,300. If you only know the total after a percentage change, the reverse percentage calculator recovers the starting amount.

Frequently asked questions

Related calculators

Guides that use this calculator

Longer explanations of the method behind it, with worked examples.