Simple Interest Calculator

How to use the simple interest calculator

Choose what you want to find — the interest, the principal, the rate or the time — and fill in the other values. Time can be entered in years, months or days; for days you can pick a 365-day year or the 360-day "banker's year" some lenders use. When solving for principal, rate or time, enter the interest amount in the last box.

The results show the answer, the total amount (principal plus interest), the interest earned or charged per period and, for comparison, what annual compound interest would produce over the same time. Every calculation comes with step-by-step working, so you can check it or copy the method for homework.

The simple interest formula

• I — interest
• P — principal, the original amount borrowed or invested
• R — annual interest rate as a decimal (5% = 0.05)
• T — time in years (months ÷ 12, or days ÷ 365 or 360)
• A — total amount at the end

Rearranging gives the other three versions:

Worked examples

Finding the interest

You invest $10,000 at 5% a year for 3 years with simple interest. I = 10,000 × 0.05 × 3 = $1,500, so you end with $11,500. The interest is the same $500 every year. With annual compounding you would earn $1,576.25 instead, because each year's interest would itself earn interest.

Interest for a number of days

A $10,000 short-term loan at 5% for 90 days costs 10,000 × 0.05 × 90 ÷ 365 = $123.29 on a 365-day basis, or 10,000 × 0.05 × 90 ÷ 360 = $125.00 on a 360-day basis. The 360-day convention slightly favours the lender.

Solving for the rate or time

If a $10,000 deposit earned $1,500 over 3 years, the rate is 1,500 ÷ (10,000 × 3) = 0.05, or 5%. To earn $1,500 on $10,000 at 5%, you need 1,500 ÷ (10,000 × 0.05) = 3 years. And to earn $1,500 in 3 years at 5%, you need to invest 1,500 ÷ 0.15 = $10,000.

Simple vs compound interest

Simple interest is charged or paid only on the original principal, so the balance grows in a straight line. Compound interest adds interest to the balance, so future interest is calculated on a bigger number and growth accelerates over time. Over short periods the difference is small; over decades it is enormous. At 5% for 30 years, $10,000 grows to $25,000 with simple interest but over $43,000 with annual compounding. For savings and investments, use the compound interest calculator.

Where simple interest is used

• Car and personal loans. Many are "simple interest loans", meaning interest accrues daily on the current balance only. Paying early or extra reduces interest — see the loan calculator.
• Bonds and notes. Coupons are typically simple interest on the face value.
• Short-term lending. Bridging loans, trade credit and some business loans.
• Flat-rate loans. Some lenders quote a flat rate calculated on the original amount for the whole term even as you repay. That makes the real cost much higher than it looks — the true APR can be almost double the flat rate.
• Classroom maths. I = PRT is a staple of school and exam questions on percentages.

Results are for information and planning; actual loan and deposit terms may use different day-count rules or compounding.