How this simple interest calculator works
Simple interest is interest charged only on the original principal. The rate never applies to interest that has already been earned, so the amount of interest is identical in every period and the balance grows in a straight line. This makes it common on short-term loans, car finance and some bonds.
The calculator uses the standard formula I = P × r × t, where P is the principal, r is the annual interest rate written as a decimal (so 5% becomes 0.05), and t is the time in years. The total amount you end up with is A = P + I. If you enter the time in months, it is converted to years by dividing by 12. You can also rearrange the formula to solve for any one variable: P = I / (r × t), r = I / (P × t), or t = I / (P × r).
Simple interest differs from compound interest, where each period's interest is added to the balance and goes on to earn interest of its own — producing a larger total over long periods.
Reference note: this is an estimate, not financial advice. It assumes a fixed rate and ignores taxes, fees, inflation and compounding, so real-world loan and savings results will differ.
Frequently asked questions
- What is simple interest?
- Simple interest is interest calculated only on the original principal, never on interest already earned. Because the base never changes, the interest is the same in every period and the balance grows in a straight line.
- How is simple interest calculated?
- Use I = P × r × t, where P is the principal, r is the annual rate as a decimal and t is the time in years. The interest I is then added to the principal to get the total amount A = P + I.
- What is the difference between simple and compound interest?
- Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest is charged on the principal plus accumulated interest, so it grows on a curve and produces a larger balance over long periods.
- How do I find the rate or time from simple interest?
- Rearrange the formula. To find the annual rate, divide the interest by principal times time: r = I / (P × t). To find the time in years, divide the interest by principal times rate: t = I / (P × r).
- What is the simple interest formula?
- The formula is I = P × r × t. P is the principal, r is the annual rate as a decimal (5% is 0.05), and t is the time in years. The total amount is A = P + I.
- Is this calculator financial advice?
- No. It is an educational estimate based on the numbers you enter and assumes a fixed rate with no taxes, fees or compounding. Actual loan and savings terms vary, so consult a qualified professional for decisions about your money.