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Simple Interest Calculator
Work out simple interest with the formula I = P × r × t, and see how much more the same money would earn with compounding.
The simple interest formula
I = P × r × t
- P is the principal, the amount borrowed or deposited.
- r is the yearly rate as a decimal (5% = 0.05).
- t is the time in years. For months divide by 12; for days divide by 365.
The total amount at the end is A = P × (1 + r × t). Interest is charged only on the original principal, never on interest already earned.
Worked examples
- $10,000 at 5% for 3 years: 10,000 × 0.05 × 3 = $1,500, for a total of $11,500. With yearly compounding it would be $1,576.25, about $76 more.
- $2,000 at 8% for 9 months: 2,000 × 0.08 × 9/12 = $120.
- $800 at 12% for 45 days: 800 × 0.12 × 45/365 = $11.84.
Simple vs compound interest
Over short periods the two are close. Over long periods compounding pulls far ahead: $10,000 at 5% for 30 years earns $15,000 in simple interest but $33,219 compounded yearly. That is why borrowers prefer simple interest and savers want compounding. See the compound interest calculator for regular deposits.
Frequently asked questions
What is the simple interest formula?
I = P × r × t: interest equals the principal times the yearly rate (as a decimal) times the time in years. $5,000 at 6% for 2 years earns 5,000 × 0.06 × 2 = $600.
Where is simple interest used?
Many auto loans, some personal and short-term loans, Treasury bills and bonds' coupon payments use simple interest. Savings accounts and credit cards compound instead.
How do I find the rate or time?
Rearrange the formula: r = I ÷ (P × t) and t = I ÷ (P × r). If $5,000 earned $600 in 2 years, the rate was 600 ÷ (5,000 × 2) = 6%.