Simple interest is charged only on the original principal, never on interest already earned. It is used for many short-term loans, some bonds and car finance quotes.
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 years, months or days.
Formula
Interest = Principal × (Rate ÷ 100) × Time (years) Total = Principal + Interest
Worked examples
Input: $5,000 at 6% for 3 years
Result: Interest $900
Total repaid $5,900
Input: $10,000 at 5% for 90 days
Result: Interest $123.29
10,000 × 0.05 × 90/365
Simple vs. compound interest
With simple interest the interest each year is the same, because it is always calculated on the original principal. With compound interest the interest is added to the balance and then earns interest itself, so growth accelerates over time. For periods longer than a year the difference becomes significant — compare both with the Compound Interest Calculator.
Day-count conventions
This calculator uses a 365-day year for periods entered in days (the "actual/365" convention). Some lenders use 360 days, which makes the interest slightly higher.
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 do I calculate simple interest per month?
Divide the annual interest by 12, or enter the time in months.
Is simple interest better for borrowers?
Generally yes — for the same rate, a simple-interest loan costs less than one with compounding interest.
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