How to use this simple interest calculator
Simple interest needs just three numbers. Enter them and the answer appears instantly, along with the total amount and a comparison with compounding.
- Enter the principal, the amount you are depositing, investing or borrowing.
- Enter the annual interest rate. If your rate is quoted per month, multiply it by 12 first.
- Choose years, months or days under "Time in", then enter the time. Days are converted with a 365-day year.
- Read the results: the interest, the total amount, the interest per year, month and day, and what monthly compounding would give instead.
The simple interest formula
I = P × r × t · A = P + I I = interest · P = principal · r = annual rate as a decimal (5% = 0.05) · t = time in years · A = total amount
Simple interest is charged or paid on the principal only. It never earns interest of its own, so the same amount is added every year and the balance grows in a straight line. Because the formula is a single multiplication, you can rearrange it to find any missing piece:
P = I ÷ (r × t) · r = I ÷ (P × t) · t = I ÷ (P × r) Find the principal, the rate or the time when you know the other three.
For example, if $10,000 earned $1,500 over 3 years, the rate was $1,500 ÷ ($10,000 × 3) = 0.05, or 5%. If you want to earn $1,500 at 5% on $10,000, the time needed is $1,500 ÷ ($10,000 × 0.05) = 3 years. And to earn $1,500 in 3 years at 5%, you need $1,500 ÷ (0.05 × 3) = $10,000.
Worked example
You put $10,000 into an account paying 5% simple interest for 3 years.
- Interest: $10,000 × 0.05 × 3 = $1,500.00.
- Total amount: $10,000 + $1,500 = $11,500.00.
- That is $500.00 a year, $41.67 a month or $1.37 a day.
If the same account compounded monthly, you would earn $1,614.72, which is $114.72 (7.6%) more. Change the time to 18 months and simple interest is $750.00. At 90 days it is $123.29.
Where simple interest is used
Most savings accounts and mortgages compound, but simple interest still turns up in plenty of places:
- Car loans. Many US auto loans are called simple-interest loans: interest is charged daily on the balance you still owe and is never added on top. Paying early or paying extra cuts the interest. The car loan calculator models the full repayment schedule.
- Bonds. A bond's coupon is simple interest on its face value. A $1,000 bond with a 4% coupon paid twice a year pays $20 every six months, whatever happens to its market price.
- Short-term loans. Bridging finance, promissory notes, invoice finance and loans between family members are often priced with simple interest because the term is short and the maths is easy to agree on.
- Some savings products. Certificates of deposit and term deposits that pay interest out to another account, rather than adding it to the balance, effectively earn simple interest. So do short terms that pay all the interest at maturity.
- Flat-rate loans. Some car and personal loans, especially outside the US, quote a "flat" rate: simple interest on the original amount for the whole term. This looks cheap but is not, as the next section shows.
Simple vs compound interest
The difference starts small and grows quickly. Over one year at 5%, monthly compounding adds just $11.62 on $10,000. Over three years it adds $114.72. The real gap shows up in how long money takes to double: 20 years with simple interest at 5%, but about 13.9 years with monthly compounding.
| Time at 5% on $10,000 | Simple interest | Compounded monthly | Difference |
|---|---|---|---|
| 90 days | $123.29 | $123.79 | $0.51 |
| 1 year | $500.00 | $511.62 | $11.62 |
| 3 years | $1,500.00 | $1,614.72 | $114.72 |
For savers, that makes compounding the better deal, and the compound interest calculator shows long-term growth with regular deposits. For borrowers it is the other way around, as long as the simple interest is charged on what you still owe.
Watch out for flat rates. $10,000 borrowed at 5% flat over 3 years means $1,500 of interest and repayments of $319.44 a month. A normal loan at 5% would cost $299.71 a month and $789.52 in interest. The flat loan is the same as borrowing at an APR of about 9.3%. Compare offers properly with the loan comparison calculator.
Using the per-day figure
For short-term loans repaid in one go, the daily interest tells you what each extra day costs. Borrow $5,000 at 8% for 9 months and you owe $300 in interest, or about $1.10 a day. Repay a month early and you save roughly $33. The same logic works for savings: the per-day figure shows what you give up by withdrawing from a deposit early, before any break fees.
Common mistakes with simple interest
- Using the percentage instead of the decimal. 5% is 0.05 in the formula. Using 5 gives an answer 100 times too big.
- Mixing time units. The rate is per year, so time must be in years too. Six months is 0.5, not 6.
- Forgetting the day-count basis. Some banks, bond markets and lenders use a 360-day year (sometimes called the banker's rule), which gives slightly more interest. Check the fine print on short-term deals.
- Applying it to an amortizing loan. If you repay as you go, interest is charged on a falling balance, so P × r × t on the original amount overstates the cost. Use the loan calculator instead.
The terms vary a little by country. US banks quote savings rates as an APY, which includes compounding, while UK banks use AER. Australian term deposits often list a rate "p.a." with interest paid at maturity, monthly or annually, and the more often it is paid into the deposit itself, the closer it gets to compound interest.
Frequently asked questions
What is the simple interest formula?
How do I calculate simple interest for months or days?
Which is better, simple or compound interest?
Is a car loan simple interest?
What is a flat interest rate?
Why does a 360-day year give more interest?
This calculator gives estimates for education and planning. It is not financial advice, and your lender's figures may differ. See how we calculate.