How to use the Simple Interest calculator
- Enter your numbers. Fill in principal, annual interest rate, time, time unit.
- Read your results. Results update instantly. The headline shows the simple interest; the breakdown below show the details.
The simple interest formula
where P is the principal, r the annual rate as a decimal and t the time in years. Months are converted as months ÷ 12, and days as days ÷ 365.
Worked example
$5,000 at 5% for 3 years earns 5,000 × 0.05 × 3 = $750, for a total of $5,750. For 90 days, it’s 5,000 × 0.05 × 90 ÷ 365 = $61.64.
Simple vs. compound interest
Simple interest is charged only on the original principal. Compound interest also earns interest on past interest, so it grows faster over time. Simple interest is used for many auto loans, some personal loans and short-term notes. For savings and investments, use the compound interest calculator.
Worked example
With these inputs: principal $5,000; annual interest rate 5%; time 3; time unit Years.
The calculator gives a simple interest of $750.00 (total $5,750.00). Other results: total (principal + interest) $5,750.00, interest per year $250.00, interest per month $20.83, interest per day (365) $0.68.
What your results mean
Simple interest is the interest on the original principal only. The total is principal plus interest at the end of the period.
Tips
- Convert months to years by dividing by 12.
- Use compound interest for savings that earn interest on interest.
- Check whether a loan uses a 360- or 365-day year.
Frequently asked questions
What is the simple interest on $10,000 at 6% for 2 years?
$10,000 × 0.06 × 2 = $1,200.
How is simple interest different from APR?
APR is an annual rate that can include fees; simple interest is a method of calculating interest on principal only.
How do I find the rate from simple interest?
r = I ÷ (P × t). $750 interest on $5,000 over 3 years is 750 ÷ 15,000 = 5%.
Do banks use 360 or 365 days?
It varies. Some commercial loans use a 360-day year, which slightly increases interest. This calculator uses 365.
Are car loans simple interest?
Most U.S. auto loans use simple interest on the daily balance, which is why paying early saves interest.
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