Simple interest calculator

What is simple interest?

Simple interest is calculated only on the original principal amount, for the entire time period, without any interest being added to that principal along the way. This makes it grow at a steady, linear rate, unlike compound interest, which grows faster over time because it also earns interest on previously accumulated interest.

This calculator can solve for any one of the four values in the simple interest formula, interest, principal, rate, or time, as long as you know the other three.

How to use it

1. Choose what you want to solve for: Interest, Principal, Rate, or Time.
2. The field for whatever you're solving for is hidden, fill in the remaining three fields with your known values.
3. For time, choose whether you're entering years, months, or days.
4. Click Calculate to see the full breakdown, including the total amount and a principal-versus-interest split.

The simple interest formula

Simple interest is calculated as: I = P × R × T ÷ 100, where I is the interest earned or owed, P is the principal, R is the annual interest rate as a percentage, and T is the time in years.

Rearranging this formula lets you solve for any of the other three variables:

• Principal: P = I × 100 ÷ (R × T)
• Rate: R = I × 100 ÷ (P × T)
• Time: T = I × 100 ÷ (P × R)

A worked example

If you invest $10,000 at a 5% annual simple interest rate for 3 years: I = 10,000 × 5 × 3 ÷ 100 = $1,500 in interest, for a total amount of $11,500 at the end of the term. Notice that this is a fixed dollar amount added each year (here, $500 per year), unlike compound interest where the interest amount itself grows over time.

Where simple interest is commonly used

• Short-term loans and some personal loans
• Certain types of bonds and fixed-term deposits
• Auto loans in some cases, depending on the lender
• Basic finance and math education, since it's the simplest interest model to understand

Most long-term savings accounts, mortgages, and credit cards actually use compound interest instead, since it's the more common structure for those product types. If you're modeling one of those, the Compound Interest Calculator will give a more accurate picture.

Frequently asked questions

Does the time unit (days, months, years) affect the result?

Yes, the formula requires time in years, so entering months or days automatically converts to the equivalent number of years behind the scenes (using 12 months or 365 days per year) before calculating.

Can the rate or time be solved if I don't know the interest amount?

No, all four values are mathematically linked, you need to know any three of the four (principal, rate, time, interest) to solve for the missing one.

Is simple interest better or worse than compound interest?

Neither is inherently better, it depends on which side of the transaction you're on. As a borrower, simple interest usually costs less over time than compound interest at the same rate, since interest doesn't compound on itself. As a saver or investor, compound interest works in your favor, growing your balance faster than simple interest would.

Does this calculator handle negative or zero values?

The calculator expects positive values for the fields you provide, entering zero or negative numbers may produce results that aren't practically meaningful (such as an infinite or undefined time or rate).