Simple Interest Calculator
The simple interest calculator computes interest earned or paid on a principal amount using the formula I = P*r*t, where P is principal, r is the annual interest rate (as a decimal), and t is time in years. The total amount A = P + I. For example, a principal of 1,000 at 5% annual interest for 2 years earns 100 in interest, for a total of 1,100. Simple interest does not compound, so interest is the same each year.
Formula
I = P * r * t
A = P + I = P * (1 + r*t)
where r is the decimal form of the rate (5% = 0.05)
Simple interest, and where it still applies
Simple interest is charged only on the original principal and never on interest already accrued, so it grows in a straight line while compound interest curves upward. That makes it the borrower's friend and the saver's disappointment. It still governs real instruments: many car and personal loans, the coupon payments on some bonds, and short-term or bridging finance quoted per period on the face amount. The practical test is whether interest is ever added to the balance and then itself charged interest; if it never is, the loan is simple.
Over a few months the gap between simple and compound is small, which is why simple interest is a fair approximation for short periods and a serious understatement over years. When you compare a simple-interest quote against a compound one, convert both to an APR or a total-cost figure so the headline rate does not mislead you, and remember that on savings, simple interest always loses to compounding at the same rate over any long horizon.
Simple interest calculator: frequently asked questions
What is simple interest?
Simple interest is interest calculated only on the principal amount, not on accumulated interest. The formula is I = P*r*t, where P is principal, r is annual interest rate, and t is time in years.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus accumulated interest. Over time, compound interest grows faster than simple interest.
How do I convert the interest rate?
If the rate is given as a percentage (e.g., 5%), divide by 100 to get the decimal (0.05). This calculator accepts percentage form directly.
Can the time period be in months?
Yes. This calculator allows you to specify the time period. If you enter months, the calculation is still based on the fraction of a year (e.g., 6 months = 0.5 years).
When is simple interest used?
Simple interest is used for short-term loans, bonds, savings accounts with simple interest, and some certificates of deposit (CDs).
Official sources
- Wikipedia: Interest.
- Wolfram MathWorld: Simple Interest.
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.