Calculate simple interest (I = P × r × t) on a loan or investment — the interest earned, the total amount, and a clear principal-vs-interest breakdown. Free, instant, works on any device.
I = P × r × t
Simple interest is calculated only on the original principal — never on previously earned interest. The formula is I = P × r × t, where P is the principal, r is the annual rate (as a decimal), and t is the time in years. For example, $10,000 at 5% for 3 years earns 10,000 × 0.05 × 3 = $1,500 in interest, for a total of $11,500. Unlike compound interest, the interest each year stays the same because it's always based on the starting amount.
Simple interest is common in short-term loans, car loans, some personal loans, and many bonds and certificates. It's almost always better for a borrower (you pay less than with compounding) and worse for a saver (you earn less than compounding). When comparing offers, check whether the rate is simple or compound — over long periods the difference is large.
Interest = Principal × Rate × Time. Total = Principal + Interest. Time must be in years (6 months = 0.5, 90 days ≈ 0.2466).
Simple interest is flat each period. Compound interest grows because it earns interest on interest — so compound always exceeds simple over time at the same rate.
Auto loans, short-term personal loans, Treasury bills, and many bonds use simple interest. Savings accounts and credit cards use compound interest.
This tool converts months and days to years for you (months ÷ 12, days ÷ 365), so you can enter the period in whatever unit your loan uses.
Simple interest is charged only on the original principal, never on accumulated interest. That makes it the cheaper arrangement for a borrower and the poorer one for a saver, and it explains why it survives mainly in short-dated instruments — car loans in some jurisdictions, bridging finance, Treasury bills and informal lending — where the term is too short for compounding to matter much. Because the interest per period never changes, total interest is linear in time: doubling the term exactly doubles the interest, which is never true of a compound loan.
I = P × r × tA = P + I = P(1 + rt)where:
Assumptions: Assumes the rate and principal are unchanged for the full term and that no payments are made until maturity. If you make payments along the way, the principal falls and an amortization calculation applies instead.
A short-term $8,000 loan at 5.5% simple interest, repayable in full after nine months.
Result$330 interest — $8,330 repayable
The same loan at 5.5% compounded monthly would cost $335 — only $5 more, which is why simple interest is a reasonable approximation at short terms. Stretch it to ten years and the gap widens to over $1,300.