Simple interest and total amount over any period.
Simple interest is the most basic way interest is worked out: a fixed percentage of the original amount for each year. This simple interest calculator applies the I = PRT formula for any time period in years, months or days. It shows the interest, the total amount, the interest per year, and what the same deposit would earn with monthly compounding, so you can see the difference.
Quick answer: simple interest = principal × rate × time, or I = P × r × t, with the rate as a decimal and the time in years. $5,000 at 6% for 3 years earns 5,000 × 0.06 × 3 = $900, for a total of $5,900.
How to Use the Simple Interest Calculator
- Principal: the amount borrowed or invested.
- Annual interest rate.
- Time: in years, months or days.
- Read the interest, total amount, interest per year and the compound comparison.
The Simple Interest Formula
I = P × r × t
- I = interest
- P = principal
- r = annual rate as a decimal (6% = 0.06)
- t = time in years
Total amount: A = P + I = P(1 + rt)
Rearranged:
- Rate: r = I ÷ (P × t)
- Time: t = I ÷ (P × r)
- Principal: P = I ÷ (r × t)
Simple Interest Examples
$5,000 at 6% for 3 years.
I = 5,000 × 0.06 × 3 = $900. Total: $5,900.
$2,000 at 9% for 18 months.
Convert to years: 18 ÷ 12 = 1.5. I = 2,000 × 0.09 × 1.5 = $270.
$1,000 at 5% for 90 days.
Convert to years: 90 ÷ 365 ≈ 0.2466. I = 1,000 × 0.05 × 0.2466 ≈ $12.33.
Finding the rate. $400 of interest on $4,000 over 2 years: r = 400 ÷ (4,000 × 2) = 0.05, or 5%.
Where Simple Interest Is Used
- Some short-term loans and personal loans between family or friends.
- Certificates of deposit and bonds that pay out interest instead of reinvesting it.
- Late payment interest on some invoices.
- School maths, as the first step before compound interest.
Most savings accounts, credit cards and mortgages use compound interest instead.
Simple vs Compound Interest
| Simple interest | Compound interest | |
|---|---|---|
| Interest paid on | The original amount only | The original amount plus interest already earned |
| $5,000 at 6% for 3 years | $900 | About $983 with monthly compounding |
| Growth over time | A straight line | A curve that gets steeper |
For savings with regular deposits, use the compound interest calculator. For loan repayments, use the loan calculator.
Mistakes to Avoid
- Using the rate as a whole number. 6% must be entered in the formula as 0.06.
- Mixing months and years. Convert months to years by dividing by 12 before using the formula. The calculator does this for you.
- Assuming a loan uses simple interest. Most loans charge interest on the falling balance, so check your loan terms.
Simple Interest FAQs
What is the formula for simple interest?
I = P × r × t, where P is the principal, r is the yearly rate as a decimal and t is the time in years.
How do I calculate simple interest for months?
Divide the number of months by 12 to get years. 8 months is 8 ÷ 12 ≈ 0.667 years.
Why are days divided by 365?
The calculator uses a 365-day year. Some banks use 360 days for certain loans, which gives a slightly higher interest figure.
Is simple interest better for borrowers?
Generally yes, because interest does not build on itself. For savers, compound interest earns more.
How we checked this page: every example was worked by hand with I = PRT and matches the calculator.
These results are estimates for planning and are not financial advice.