Simple Interest Calculator
Quickly calculate interest earned or owed using the simple interest formula: I = P × r × t.
What is simple interest?
Simple interest is calculated only on the original principal amount — it never earns "interest on interest" the way compound interest does. It's commonly used for certain short-term loans, some auto loans, and basic interest problems in finance courses, because the calculation is straightforward and the interest owed grows in a straight line over time rather than accelerating.
The formula
Interest (I) = Principal (P) × Rate (r) × Time (t), where the rate is expressed as a decimal (5% = 0.05) and time is in years. Total amount = Principal + Interest.
Simple vs. compound interest
Over the same rate and time period, compound interest always produces more growth (for an investment) or more cost (for a loan) than simple interest, because compound interest accumulates on previously earned interest. If you're modeling a savings account or investment that reinvests earnings, use our Compound Interest Calculator instead.
Frequently asked questions
When is simple interest used in real life?
Simple interest is common in some short-term personal loans, certain auto loans, U.S. Treasury bills, and basic bonds. Most credit cards, mortgages, and savings accounts use compound interest instead.
How do I convert months or days to years for this formula?
Divide months by 12 or days by 365 to get a fractional year — this calculator does that conversion automatically based on the time unit you select.
Can simple interest apply to a loan I owe, not just savings?
Yes — the same formula works whether you're earning interest on a deposit or owing interest on a loan; just interpret the "total amount" as what you'd owe or what you'd receive.
Why is my compound interest result different from simple interest for the same numbers?
Compound interest reinvests each period's interest, so it compounds on a growing balance, while simple interest is always calculated on the same original principal — the longer the time period, the bigger that gap becomes.