Simple Interest Calculator
Simple interest is calculated only on the original principal—no interest on interest. The formula is I = P × R × T, where P is principal, R is the annual rate (as a decimal), and T is time in years. This calculator gives you the interest amount and the total (principal + interest), useful for short-term loans or quick estimates.
Calculate simple interest
How it works
Interest = Principal × Rate × Time. Rate is expressed as a decimal (e.g. 5% = 0.05). Time is in years—for 6 months use 0.5, for 18 months use 1.5. Total amount = Principal + Interest.
Example: $5,000 at 4% for 2 years: I = 5000 × 0.04 × 2 = $400. Total = $5,400. Unlike compound interest, each year you only earn 4% on the original $5,000, not on the growing balance.
When to use it
Use simple interest when the contract or problem specifies it: some personal loans, promissory notes, or educational examples. For most bank accounts and long-term loans, institutions use compound interest, so for those you’d use a compound interest calculator instead.
Frequently asked questions
- When is simple interest used in practice? Some short-term loans, bonds, or regulatory calculations use simple interest. Many consumer loans and savings accounts use compound interest instead.
- How do I enter time in months? Convert to years: divide months by 12. For example, 6 months = 0.5 years, 18 months = 1.5 years.
- Does this work for finding principal or rate? This tool solves for interest and total amount given P, R, T. To find P or R, rearrange: P = I/(R×T), R = I/(P×T).