Simple Interest Calculator
Calculate simple interest on a principal amount.
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How to Use
- 1Enter principal, annual rate and time in years.
- 2View the interest and total amount.
Features
- Simple interest formula
- Total amount calculation
- Copy result
Example
Input
$1,000 at 5% for 3 years
Output
$150 interest
Calculate simple interest earned or owed on a principal amount over a given time period at a fixed rate.
The simple interest formula
Simple interest is charged or earned only on the original amount, the principal, never on interest already added. The formula is I = P × r × t: principal times annual rate (as a decimal) times time in years. The total amount at the end is P + I. For example, 1,000 at 5% for 3 years earns 150 in interest, for a total of 1,150.
Where simple interest is used
- Some short-term personal loans and informal loans between people.
- Many car loans, where interest is calculated on the outstanding principal.
- Certain bonds and fixed deposits that pay interest out rather than reinvesting it.
- Calculating late-payment interest on invoices.
- School and exam maths problems.
Simple versus compound
| 100,000 at 10% for 20 years | Final amount |
|---|---|
| Simple interest | 300,000 |
| Compound interest (annual) | 672,750 |
Over a short period the two are close. Over long periods compounding pulls far ahead, which is why savers prefer compound interest and borrowers prefer simple interest.
Periods other than whole years
Time must be in years, so convert other periods first: 6 months is 0.5 years, 18 months is 1.5 years, and 90 days is about 0.247 years (90 ÷ 365). Some lenders divide by 360 instead of 365, which slightly increases the interest.
See the effect of compounding with the Compound Interest Calculator.