What the Simple Interest Calculator does
This calculator works out simple interest - interest charged or earned only on the original principal - and the total repayable, from the principal, an annual rate and a time in years, months or days. It can also run the formula backwards to find the rate, the time or the principal when you know the interest.
Simple interest is still how many short-term deposits, some personal and car loans, trade credit, bonds' accrued interest and late-payment charges are calculated. The page shows the formula with your numbers in it, a year-by-year table, and what the same rate would have produced if it had compounded, so the difference between the two is visible rather than assumed.
How to use it
- Choose what to solve for. Interest is the usual case; pick Rate, Time or Principal when you already know the interest and need one of the other values.
- Enter the values you know. The rate is always a yearly percentage, even when the time is in months or days.
- Pick the time unit. For days, open the day-count section and choose 365, 360 or 366 days a year to match your agreement.
- Read the interest and total, check the formula line, and download the table or copy a share link that carries the inputs.
Reading the results
Interest is the same amount every year because it is always calculated on the original principal. Unpaid interest never earns interest of its own - that is the whole difference from compound interest.
The dashed comparison line shows yearly compounding at the same rate. Over a year or two the lines are close; over long periods compounding pulls away, which is why long-term savings quotes almost always use compound rates.
When solving for the rate, the answer is a simple annual rate. It is not an APR or an effective annual rate, both of which can include fees or compounding.
Worked example: a 3-year loan and a 90-day deposit
A lender charges 6% simple interest a year on 10,000 for 3 years. Interest is 10,000 x 0.06 x 3 = 1,800, so the borrower repays 11,800 in total - 600 of interest for each year.
Had the same 6% compounded yearly, the balance after 3 years would be 10,000 x 1.06^3 = 11,910.16, so compounding would have added another 110.16 of interest.
Now a 90-day deposit of 20,000 at 8%. On an actual/365 basis the time is 90/365 = 0.246575 years and interest is 20,000 x 0.08 x 0.246575 = 394.52. On an actual/360 basis the time is 90/360 = 0.25 years and interest is exactly 400.00. The same stated rate earns 5.48 more because the banker's year is shorter.
Formulas and scoring rules
- Simple interest
I = P x r x tP principal, r annual rate as a decimal (6% = 0.06), t time in years.- Total amount
A = P + I = P x (1 + r x t)- Time conversion
t = months / 12, or t = days / basis (365, 360 or 366)- Solving backwards
r = I / (P x t); t = I / (P x r); P = I / (r x t)- Rounding
Money shown to 2 decimals; calculations keep full precision until displayYour lender may round each period's interest, which can move the total by a cent or two.
Simple versus compound interest
With simple interest the interest line is flat: every year earns P x r. With compound interest, each year's interest is added to the balance and earns interest itself, so the yearly amount grows. For the same stated rate, compound interest always gives at least as much as simple interest, and the gap widens with time and with higher rates.
That is why a simple-interest deposit is not directly comparable with a savings account quoting an annual equivalent rate (AER) or annual percentage yield (APY). To compare them, use the compound interest calculator or compare what each pays over the same period in money.
Limitations: what the result does not prove
- It does not model fees, early repayment, partial payments or interest that is capitalised - once interest is added to the balance, the arithmetic is compound, not simple.
- Some loans advertised as simple interest calculate interest daily on the outstanding balance as it falls. That needs an amortisation schedule, not I = P x r x t on the original principal.
- The day-count choices cover the common conventions, but a contract can define its own (for example 30/360). Check your agreement if a few cents matter.
- It is arithmetic, not advice about whether a loan or deposit is a good deal.
Privacy: where your data goes
Everything you paste, type or drop is processed in this browser tab. It is not uploaded, logged, stored or sent to analytics. Session recording and tag-manager scripts are switched off on this page.
Standards and sources
Frequently asked questions
How do I calculate simple interest by hand?
Multiply the principal by the annual rate as a decimal and by the time in years. 5,000 at 4% for 18 months is 5,000 x 0.04 x 1.5 = 300. Convert months to years by dividing by 12 and days by dividing by 365 or 360.
What is the difference between actual/365 and actual/360?
Both count the real number of days, but divide by a different year length. Dividing by 360 makes each day worth slightly more interest, so a 90-day amount at 8% on 20,000 is 400.00 on actual/360 and 394.52 on actual/365. Money-market instruments often use 360; many retail deposits use 365.
How do I find the interest rate if I know the interest paid?
Divide the interest by the principal times the time in years: r = I / (P x t). A borrower who paid 450 on 5,000 over 18 months paid 450 / (5,000 x 1.5) = 6% a year simple. Choose Rate under Solve for and the page does this for you.
Is simple interest better than compound interest?
For a borrower paying the same stated rate, simple interest costs less because interest is never charged on interest. For a saver, compound interest earns more. The comparison line on the chart shows the difference for your numbers.
Why does my loan statement not match I = P x r x t?
Most instalment loans charge interest on the balance still owed, which falls with each payment, and some add fees. That is a declining-balance calculation. Use a loan or EMI calculator for those; this formula applies when interest is charged on the full original principal for the whole time.
How long does it take to earn a given amount of simple interest?
Divide the target interest by the principal times the rate: t = I / (P x r). At 6% on 10,000, earning 1,800 takes 1,800 / 600 = 3 years. Choose Time under Solve for and select months or days to see the answer in that unit.
Last reviewed by the A2Z.Tools team against the sources listed above.
