How to use this calculator
- Enter the principal (the amount borrowed or deposited).
- Enter the annual interest rate.
- Enter the time in years. Use decimals for partial years, e.g. 1.5 for 18 months.
Formula
Simple interest grows linearly: each year adds the same amount of interest, because interest is never charged on previous interest.
I = P × r × t
A = P + I = P × (1 + r × t)
Example
- P = $10,000, r = 5% = 0.05, t = 3 years.
- I = 10,000 × 0.05 × 3 = $1,500.
- Total amount A = $11,500.
Frequently asked questions
Where is simple interest used?
Some short-term loans, car loans in certain countries, bonds that pay coupons, and many classroom problems use simple interest. Most savings accounts and credit cards use compound interest.
How do I convert months or days to years?
Divide months by 12 or days by 365 (some lenders use 360). For example, 90 days = 90 ÷ 365 ≈ 0.2466 years.
Is simple interest better for borrowers?
At the same stated rate, simple interest costs less than compound interest, because interest doesn't accumulate on interest.