How to use the simple interest calculator
- Enter the principal: the amount borrowed or invested.
- Enter the annual interest rate as a percentage.
- Enter the time and choose years, months or days.
- The calculator shows the interest, the total amount, and a year-by-year table.
The simple interest formula
For months, divide by 12 to get years; for days, divide by 365. Some lenders divide by 360 instead of 365 (the "banker's year"), which makes daily interest slightly higher.
Worked example
The calculator's defaults are $10,000 at 5% a year for 3 years:
- Interest per year: $10,000 × 0.05 = $500
- Interest for 3 years: $500 × 3 = $1,500.00
- Total amount: $10,000 + $1,500 = $11,500.00
For 18 months instead, t = 18 ÷ 12 = 1.5 years, so the interest is $10,000 × 0.05 × 1.5 = $750.00.
Simple vs. compound interest
Simple interest is only ever charged on the original principal, so it grows by the same amount every year. Compound interest is charged on the principal plus the interest already added, so it grows faster over time.
| Year | Simple interest balance | Compound interest balance (yearly) |
|---|---|---|
| 1 | $10,500.00 | $10,500.00 |
| 3 | $11,500.00 | $11,576.25 |
| 10 | $15,000.00 | $16,288.95 |
| 20 | $20,000.00 | $26,532.98 |
Both columns use $10,000 at 5%. See the compound interest calculator for compounding at any frequency.
Where simple interest is used
Simple interest appears in some car loans and personal loans where interest is worked out on the outstanding balance each day, in short-term business loans, in bonds that pay a fixed coupon, and in certificates of deposit that pay interest out rather than adding it to the balance. Most savings accounts and credit cards use compound interest instead.
Frequently asked questions
How do I calculate simple interest for months?
Convert the months to years by dividing by 12, then multiply: $10,000 at 5% for 18 months is $10,000 × 0.05 × 1.5 = $750. Choose "months" in the calculator to do this automatically.
How do I find the rate if I know the interest?
Rearrange the formula: r = I ÷ (P × t). If $10,000 earned $1,500 in 3 years, the rate is 1,500 ÷ (10,000 × 3) = 0.05, or 5% a year.
Is simple interest better for borrowers?
For the same rate and term, yes: a loan with simple interest costs less than one where interest compounds, because you never pay interest on interest. Compare the APR and total cost of any loan offer.
Does the calculator use 365 or 360 days a year?
It uses 365 days. If your lender uses a 360-day year, daily interest is 365 ÷ 360, about 1.4% higher than the result shown.
Related calculators
- Compound Interest Calculator — How a starting balance and monthly contributions grow, with any compounding frequency.
- Loan Calculator — Monthly payment, total interest and a full amortization schedule, plus what extra payments save.
- Interest Calculator — Interest earned on a balance with regular deposits, any compounding, tax on interest and inflation.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.