Simple Interest Calculator
Calculate flat-rate interest on a principal amount over time.
Try an example
$1,500.00
About this calculator
What Is Simple Interest?
Simple interest is interest calculated only on the original amount of money — the principal — and never on interest that has already built up. It is the most straightforward way to price borrowing or saving, and you will find it on some auto loans, short-term personal loans, certain bonds, and in many school math problems. This simple interest calculator works out the interest and the final balance from the principal, rate and time you enter.
The Simple Interest Formula
I = P × r × t, where I is the interest earned or owed, P is the principal, r is the annual interest rate written as a decimal, and t is the time in years. The end balance is A = P + I. If the time is given in months or days, convert it to years first (months ÷ 12, days ÷ 365).
Worked Example
A $10,000 principal at 5% simple interest for 3 years earns $1,500 — for a total of $11,500.
Reading the Result
Because the interest is the same every year, simple interest grows in a straight line: a balance that earns $600 in year one earns another $600 in each year after. That is easy to predict, and it is also why simple interest grows more slowly than compound interest over long periods. The longer the term, the bigger the gap.
When Simple Interest Is Used
- Short-term loans where the interest is charged once or at a flat yearly rate.
- Auto loans and some consumer loans that calculate interest on the remaining principal each period.
- Bonds that pay a fixed coupon based on face value.
- Classroom and exam problems, where the formula is a standard exercise in percentages.
Simple Interest vs. Compound Interest
Simple interest never adds interest to the principal, so the amount you earn or owe stays constant per period. Compound interest does add it, so each period's interest is calculated on a larger balance. As a borrower, simple interest costs less over time; as a saver, compound interest pays more. To see the difference on the same numbers, run them through the Compound Interest Calculator as well.
Solving for Other Values
You can rearrange the formula to find anything you are missing: principal = I ÷ (r × t), rate = I ÷ (P × t), and time = I ÷ (P × r). That makes it handy for questions like "what rate turns $5,000 into $5,750 in three years?" — here the interest is $750, so the rate is 750 ÷ (5,000 × 3) = 5%.
Worked example
A $10,000 principal at 5% simple interest for 3 years earns $1,500 in interest — a total of $11,500, since simple interest never compounds.
Frequently asked questions
What's the formula?
I = P × r × t — principal times the annual rate times the number of years.
How is this different from compound interest?
Simple interest is always calculated on the original principal only; compound interest also earns interest on previously accumulated interest, so it grows faster over time.
Where is simple interest commonly used?
Some auto loans, short-term personal loans, and certain bonds use simple interest — most savings accounts and investments use compound interest instead.
What if the time period isn't in whole years?
Convert it to a decimal (e.g., 6 months = 0.5 years) before calculating.
