Simple Interest Calculator

About Simple Interest Calculator

Calculate simple interest using the I = PRT formula. Enter the principal amount, annual interest rate, and time period (in years, months, or days) to see the interest earned and total amount. The calculator also shows a side-by-side comparison with compound interest so you can see the difference between the two methods.

The Simple Interest Formula

Simple interest is calculated using one of the most straightforward formulas in finance:

I = P x R x T

Where:

• I = Interest earned (or charged)
• P = Principal (the original amount)
• R = Annual interest rate (as a decimal, so 5% = 0.05)
• T = Time in years

The total amount at the end is: A = P + I = P x (1 + R x T)

Worked example: You deposit $10,000 at 5% simple interest for 3 years:

• I = $10,000 x 0.05 x 3 = $1,500
• Total: $10,000 + $1,500 = $11,500

The interest is the same each year ($500), regardless of how much has already been earned. This is the key difference from compound interest, where earned interest itself earns interest.

Simple Interest vs Compound Interest

Over short periods, the difference is small. Over long periods, it becomes enormous:

Time	$10,000 at 5% Simple	$10,000 at 5% Compound (Annual)	Difference
1 year	$10,500	$10,500	$0
3 years	$11,500	$11,576	$76
5 years	$12,500	$12,763	$263
10 years	$15,000	$16,289	$1,289
20 years	$20,000	$26,533	$6,533
30 years	$25,000	$43,219	$18,219

At 30 years, compound interest produces 73% more than simple interest at the same rate. This is why long-term investments always use compound interest, and why starting to save early matters so much. For detailed compound interest modelling, use the compound interest calculator.

Where Is Simple Interest Used?

Simple interest is less common than compound interest, but it appears in several real-world situations:

Product	How Interest Works	Typical Rate
US Treasury bills (T-bills)	Simple interest, discount basis	4.0 - 5.5%
Short-term personal loans	Simple interest on original balance	6 - 36%
Some auto loans	Simple interest (daily accrual)	5 - 15%
Certificates of Deposit (interest only)	Simple interest paid periodically	4 - 5%
Late payment penalties	Simple interest on overdue amount	1 - 1.5%/month
Interest between payment dates	Pro-rated simple interest	Varies
Some bonds (coupon payments)	Fixed percentage of face value	3 - 7%

In banking, most savings accounts and loans actually use compound interest. When a product advertises a "simple" rate, it often means the stated rate does not account for compounding, which is why the APR (Annual Percentage Rate) differs from the APY (Annual Percentage Yield).

Calculating Interest for Partial Years

Simple interest is particularly useful for periods shorter than a year. Just express T as a fraction:

Period	T Value	$10,000 at 5%
1 month	1/12 = 0.0833	$41.67
90 days	90/365 = 0.2466	$123.29
6 months	6/12 = 0.5	$250.00
9 months	9/12 = 0.75	$375.00

Day count conventions matter for precise calculations. The most common are:

• Actual/365: Divides by 365 (or 366 in leap years). Used for US Treasury bills and most UK interest calculations.
• Actual/360: Divides by 360, making each day slightly "more expensive." Used for US money market instruments and some commercial loans.
• 30/360: Assumes 30 days per month and 360 days per year. Used for some US corporate bonds.

This calculator uses Actual/365 for day-based calculations and divides by 12 for month-based calculations.

Rearranging the Formula

You can solve for any of the four variables:

Find	Formula	Example
Interest (I)	I = P x R x T	$5,000 x 0.06 x 2 = $600
Principal (P)	P = I / (R x T)	$600 / (0.06 x 2) = $5,000
Rate (R)	R = I / (P x T)	$600 / ($5,000 x 2) = 0.06 = 6%
Time (T)	T = I / (P x R)	$600 / ($5,000 x 0.06) = 2 years

These rearrangements are useful for answering questions like "what rate do I need to earn $1,000 in 18 months on a $20,000 deposit?" (Answer: R = $1,000 / ($20,000 x 1.5) = 3.33%).

Simple Interest for Borrowers vs Savers

The same formula works for both lending and borrowing, but the implications are different:

• As a saver: Simple interest means you earn less than compound interest over time. If a savings product offers simple interest, the advertised rate will match your actual return only in the first year. After that, you miss out on interest-on-interest.
• As a borrower: A simple interest loan costs less than a compound interest loan at the same rate. With a simple interest auto loan, paying early each month reduces the balance faster and lowers total interest. Making biweekly payments effectively adds one extra monthly payment per year.

For savings planning with regular contributions, the savings goal calculator figures out how much to set aside each month. To project long-term investment growth, the investment return calculator models compound growth with regular contributions.

All calculations run entirely in your browser. No data is stored or sent anywhere.