Simple Interest Calculator

Calculate simple interest on loans and investments

About Simple Interest Calculator

Simple interest is calculated only on the original principal amount, unlike compound interest, which also earns interest on previously accumulated interest. It's used for certain short-term loans, bonds, and basic interest calculations where compounding doesn't apply.

Formula

Simple Interest = Principal × Rate × Time (I = P × r × t)

How It Works

Enter the principal amount, annual interest rate, and time period
The calculator multiplies principal by rate by time to find total interest
Adding interest to principal gives the total amount owed or earned
Time is typically entered in years, but can be converted from months or days

Tips

Simple interest grows linearly (a straight line) over time, while compound interest grows exponentially — the difference becomes large over longer periods
Always match your rate and time units — an annual rate needs time in years, not months, unless you convert the rate accordingly
Simple interest is common for short-term loans, certain promotional financing, and some bonds; most everyday savings and credit products use compound interest instead

Frequently Asked Questions

How do I calculate simple interest?

Multiply principal by the annual interest rate (as a decimal) by the time in years: I = P × r × t. For example, $1,000 at 5% for 3 years: $1,000 × 0.05 × 3 = $150 interest.

What's the difference between simple and compound interest?

Simple interest is calculated only on the original principal for the entire term; compound interest is recalculated periodically on the growing balance (principal plus previously earned interest), so it grows faster over time.

How do I calculate simple interest for a period in months?

Convert months to years by dividing by 12 before multiplying. For example, 6 months = 0.5 years, so use t = 0.5 in the formula.

Does simple interest ever result in more total interest than compound interest?

No, for the same rate and principal, compound interest always earns (or costs) more over time than simple interest, since it earns interest on the interest — the gap widens the longer the time period.

Where is simple interest commonly used?

Certain auto loans, short-term personal loans, and some bonds use simple interest, while most savings accounts, credit cards, and mortgages use compound interest.