Simple Interest Calculator

Calculate simple interest on loans and investments with our easy-to-use calculator. Get instant results and understand how simple interest works.

🧮 Simple Interest Calculator

What is Simple Interest?

Simple interest is a method of calculating interest on a loan or investment based only on the original principal amount. Unlike compound interest, simple interest does not earn interest on previously accumulated interest—it's calculated solely on the initial sum throughout the entire term.

The simple interest formula is straightforward: multiply the principal by the interest rate and the time period. This makes it easy to understand and predict exactly how much interest you'll pay or earn over time.

Simple interest is commonly used for short-term loans, auto loans, some personal loans, and certain types of bonds. Understanding how simple interest works helps you make informed decisions about borrowing and investing.

How to Use This Calculator

Choose what to calculate: Select whether you want to find the end balance, principal amount, interest rate, or term length.
Enter your values: Input the known values such as principal amount, interest rate, and time period. You can choose different time units (years or months) and rate periods (per year or per month).
Click Calculate: The calculator will instantly compute the result using the simple interest formula I = P × r × t.
Review results: See your end balance, total interest, and detailed calculation steps. Visual charts help you understand the breakdown between principal and interest.

Simple Interest Formula

The basic simple interest formula is:

I = P × r × t

Where: I = Interest earned or paid, P = Principal (initial amount), r = Annual interest rate (as decimal), t = Time (in years)

To find the total amount (principal plus interest), use:

A = P(1 + rt)

Example Calculation

If you invest $20,000 at 3% annual simple interest for 10 years:

Interest = $20,000 × 0.03 × 10 = $6,000
Total Amount = $20,000 + $6,000 = $26,000

Key Insights & Best Practices

Simple vs. Compound Interest

Simple interest grows linearly over time, while compound interest grows exponentially. For the same principal, rate, and time, compound interest will always yield more than simple interest because it earns interest on accumulated interest. Most savings accounts, credit cards, and mortgages use compound interest, so always verify which type applies to your financial product.

Time Period Conversions

When working with simple interest, ensure time and rate periods match. If you have a monthly interest rate, convert time to months. For periods shorter than a year, convert to a fraction (e.g., 6 months = 0.5 years, 90 days ≈ 90/365 years). This calculator handles these conversions automatically.

Common Uses of Simple Interest

Short-term personal loans and payday loans
Auto loans and some installment loans
Certain bonds and treasury bills
Quick estimates for investment returns

Best Practices

Always verify whether your loan or investment uses simple or compound interest—the difference can be significant over time.
Use this calculator to compare different loan offers by calculating total interest paid under various rates and terms.
For investments, remember that simple interest is less common than compound interest; most savings and investment accounts compound.
Keep in mind that calculator results are estimates for educational purposes, not financial advice. Always consult your actual loan or investment documents for precise terms.

Frequently Asked Questions

How do I calculate simple interest manually?

Use the formula I = P × r × t, where P is the principal, r is the annual interest rate as a decimal (e.g., 5% = 0.05), and t is the time in years. Multiply these three values to get the interest amount. Add the interest to the principal to get the total amount.

What's the difference between simple and compound interest?

Simple interest is calculated only on the original principal amount throughout the entire term. Compound interest is calculated on the principal plus any previously earned interest, causing it to grow faster. For example, $1,000 at 5% for 10 years yields $500 in simple interest but about $629 in compound interest (compounded annually).

How do I convert months or days to years for the calculation?

To convert months to years, divide by 12 (e.g., 6 months = 6/12 = 0.5 years). To convert days to years, divide by 365 (e.g., 90 days = 90/365 ≈ 0.247 years). This calculator handles these conversions automatically when you select the appropriate time unit.

Can I use this calculator for loans with monthly payments?

This calculator computes total simple interest over the full term. Most loans with monthly payments use amortization schedules and may involve compound interest or other factors. Use this calculator for quick estimates, but consult a loan amortization calculator for detailed payment schedules.

Is simple interest better than compound interest?

It depends on your perspective. For borrowers, simple interest results in lower total interest paid, making it better for loans. For investors, compound interest yields higher returns, making it better for savings and investments. Always check which type applies to your specific financial product.

What types of loans typically use simple interest?

Simple interest is commonly used for short-term personal loans, auto loans, some student loans, and certain installment loans. However, many modern financial products use compound interest or more complex calculations, so always verify the terms of your specific loan or investment.