Simple interest is charged only on the original principal. It is used for some short-term loans, certain bonds, car loans in some countries and many classroom problems.
How to use it
Enter the principal, the annual rate as a percentage and the time. Time can be entered in months; it is converted to years automatically.
Simple vs. compound
Over one year with annual compounding, the two give the same result. Beyond that, compound interest grows faster because interest earns interest. Use the compound interest calculator for savings accounts and investments.
Inputs explained
| Field | What to enter |
|---|---|
| Principal | Amount in your currency |
| Annual rate | In % |
| Time | Units: years, months |
What each result means
- Interest = [Principal] × [Annual rate]÷100 × [Time]
- Total amount = [Principal] + [Interest]
Example values
How the main result changes when Principal changes and everything else stays at the example values above:
| Principal | Interest |
|---|---|
| 2,500 | 300 |
| 3,750 | 450 |
| 5,000 | 600 |
| 6,250 | 750 |
| 7,500 | 900 |
| 10,000 | 1,200 |
Formula
I = P × r × tA = P + IWorked example
Deposit 5,000 at 4% simple interest for 3 years.
I = 5,000 × 0.04 × 3 = 600.
Total amount = 5,000 + 600 = 5,600.
Key terms
- Principal
- The original sum lent or invested.
- Rate
- Interest charged per year, as a percentage of principal.
- Accrued interest
- Interest earned or owed up to a given date.
Frequently asked questions
How do I convert months to years?
Divide by 12, or choose months in the unit menu and the calculator converts it.
Is simple interest better for borrowers?
Generally yes, because the balance does not grow from compounding.
Can I solve for the principal?
Yes. Type the interest you want into the result and the principal is calculated.
What formula does the Simple Interest Calculator use?
I = P × r × t.
Can I work backwards from the result?
Yes. Type the result you want into Interest and the calculator finds the matching principal.