Simple Interest Calculator

This simple interest calculator shows the interest on a principal at a flat rate with no compounding. Simple interest is the most intuitive form of interest: a fixed percentage of the original amount, charged each year, with no interest on interest. Enter a principal, an annual rate and a time in years and this calculator returns the interest, the total at the end and how much accrues every year.

The formula

I = P × r × t
A = P + I

P is the principal, r the annual rate as a decimal and t the time in years. A is the total amount at the end.

When it is used

It is the model behind many short-term and personal loans, some government bonds and most classroom examples, and it is the baseline against which compound growth is usually compared.

Worked example

Lend 5,000 at 4% a year for 3 years:

I = 5,000 × 0.04 × 3 = 600
A = 5,000 + 600 = 5,600
per year = 5,000 × 0.04 = 200

The interest is the same 200 every year, because it is always computed on the original 5,000 and never on interest already accrued. Compound the same loan and you get 5,624.32 instead — a gap of only 24.32 across three years. Stretch it to thirty and the gap becomes decisive: simple interest returns 11,000, compound returns about 16,217. Short horizons hide the difference; long ones do not.

Where simple interest is really used

It is not only a classroom model. Many car loans are quoted as a flat rate on the original amount, which is simple interest, and that is why an advertised 5% flat can be a much higher effective rate once the shrinking balance is accounted for. Some government savings bonds, treasury bills and short-term personal loans work the same way, as do most informal loans between people.

The comparison that matters is the effective rate. A flat 5% on a three-year loan repaid in instalments charges interest on money you have already handed back, so the true cost of the credit you actually held is roughly twice the headline figure. Whenever a loan is advertised as flat, convert it before setting it against a reducing-balance quote from Loan EMI Calculator.

Entering the numbers

The rate must be annual and the time must be in years, and the two have to agree. Six months at 4% a year is t = 0.5, giving 100 of interest rather than 4. A monthly rate of 0.5% across twelve months is a 6% annual rate, so enter 6 with t = 1.

Partial periods are where mistakes concentrate. Count the days and divide by 365 when the term is odd, then check the answer against the yearly figure this tool prints: if the interest exceeds P × r, the time you entered is longer than a year and worth re-reading. Percentage Calculator is the quicker route when all you need is one figure as a share of another.

Private and precise

Every figure is worked out in your browser with standard financial formulas. Nothing you type is uploaded, stored or sent anywhere.