How to Use the Simple Interest Calculator
Simple interest is calculated only on the principal, not on previously earned interest. The formula is I = P × r × t, where P is the principal, r is the annual rate expressed as a decimal, and t is the time in years. The total amount returned is P + I. This calculator supports both years and months as time input units.
Simple interest grows linearly over time — double the time means double the interest. For example, $10,000 at 5% annual simple interest for 3 years earns $1,500 in interest for a total of $11,500. This is straightforward to calculate and commonly used in short-term lending scenarios such as personal loans, payday loans, and some savings accounts.
Unlike compound interest, simple interest does not earn interest on interest. Over longer periods, compound interest significantly outpaces simple interest. Use our Compound Interest Calculator to compare both and see the difference for your scenario.
Frequently Asked Questions
I = P × r × t, where P is principal, r is the annual rate as a decimal (e.g., 5% = 0.05), and t is time in years. Total amount = P + I.
When you select "Months," the period is divided by 12 to convert to years. For instance, 6 months becomes t = 0.5 years in the formula.
Simple interest is common in short-term auto loans, personal loans, some CDs (certificates of deposit), and bond coupon calculations. Most long-term investments and mortgages use compound interest instead.