Simple Interest Calculator

Calculate simple interest and total amount owed or earned from a principal, annual rate, and time period in years.

Worked example

Borrowing or investing $5,000 at 6% a year for 3 years:

• Interest = $5,000 × 0.06 × 3 = $900
• Total = $5,000 + $900 = $5,900

The interest is the same $300 every year, because it's always calculated on the original $5,000.

Simple vs. compound interest

With compound interest, each year's interest is added to the balance and earns interest itself. The same $5,000 at 6% compounded yearly for 3 years grows to about $5,955.08 — $55.08 more than simple interest. The gap widens a lot over longer periods, which is why savers want compound interest and borrowers prefer simple interest. Compare the two with the compound interest calculator.

Rearranging the formula

To find	Formula
Interest	I = P × R × T
Principal	P = I ÷ (R × T)
Rate	R = I ÷ (P × T)
Time	T = I ÷ (P × R)

Always use the rate as a decimal (6% = 0.06) and time in years. For months, divide by 12 — 18 months is 1.5 years.

Where simple interest is used

• Auto loans: many US car loans use simple interest calculated on the daily balance, so paying early saves interest.
• Treasury bills, CDs and bonds often quote interest on a simple basis.
• Short-term personal and business loans, and loans between family members.
• Classroom math: it's the first interest formula most students learn.

Frequently asked questions

What's the formula?

Interest = Principal × Rate × Time (I = PRT), where the rate is the annual rate as a decimal and time is in years. Unlike compound interest, the interest earned doesn't itself earn interest.

When is simple interest used?

Common for short-term loans, certain bonds, and some car loans — anywhere interest is calculated only on the original principal rather than compounding over time.

How do I calculate simple interest for months instead of years?

Convert the months to years by dividing by 12. For 9 months at 8% on $2,000: $2,000 × 0.08 × 0.75 = $120.