How to use the Simple Interest Calculator
- 1 Enter the principal, the amount borrowed or invested.
- 2 Enter the annual interest rate.
- 3 Enter the time and choose whether it is in years, months or days.
- 4 Read the interest and the total of principal plus interest.
Worked example
$5,000 at 6% for 3 years. Interest = $5,000 × 6% × 3 = $900, so the total is $5,900. Over 18 months instead, the time is 1.5 years and the interest is $450. With compound interest at 6% for 3 years, the interest would be about $955, a little more.
Features
Years, months or days
Choose the time unit; days use a 365-day year.
Formula shown
See P × r × t written out with your numbers.
Instant
Results update as you type.
When to use it
Short loans
Check the interest on a short personal loan between friends or family.
Coursework
Practise the simple interest formula for school and exams.
Bonds and notes
Estimate coupon interest earned on a fixed principal.
Comparing with compound
See how much less simple interest is than compound interest over the same time.
Frequently asked questions
What is the simple interest formula?
I = P × r × t, where P is the principal, r the annual rate as a decimal and t the time in years.
How is it different from compound interest?
Simple interest is always charged on the original principal; compound interest is charged on the principal plus earlier interest, so it grows faster.
How do I use months or days?
The calculator converts them to years: months ÷ 12, days ÷ 365.
Which loans use simple interest?
Many car loans and some personal loans charge simple interest on the remaining balance, which is why paying early saves interest.
How do I find the rate from the interest?
Rearrange the formula: r = I ÷ (P × t). For $900 of interest on $5,000 over 3 years, r = 900 ÷ 15,000 = 6%.
Is simple interest better for borrowers?
Yes. For the same rate and time, simple interest costs less than compound interest because interest is never charged on earlier interest.
How do I find the time from the interest?
Rearrange the formula: t = I ÷ (P × r). For $450 of interest on $5,000 at 6%, t = 450 ÷ 300 = 1.5 years.
Does a 360-day year change the answer?
Some banks use a 360-day year for daily interest, which gives slightly more interest. This calculator uses 365 days for day-based periods.
Where is simple interest used in everyday life?
Besides some car and personal loans, it appears in short-term business credit, certain bonds that pay a fixed coupon on face value, and informal loans between family members where a flat yearly rate is agreed.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Reviewed by ToolsUnlocked Team · Last updated