Simple Interest Calculator
Calculate simple interest and total repayment instantly. Enter principal, rate, and time in years to see interest earned or owed, step by step.
What is simple interest?
Simple interest is interest calculated only on the original amount you deposit or borrow — the principal. Unlike compound interest, it never adds interest back into the principal to earn more interest on top of itself. That makes it predictable: the interest earned in year one is exactly the same as the interest earned in year three, for the same principal and rate.
Simple interest shows up most often on short-term products: car loans, student loans, and short-term certificates of deposit (CDs). For anything where interest compounds over time — savings accounts, most mortgages amortized month to month — you want a compound interest or loan payment calculator instead.
The formula
- I — interest earned or owed
- P — principal (the amount deposited or borrowed)
- r — annual interest rate, written as a decimal (rate ÷ 100)
- t — time, in years
The total amount after interest is simply principal plus interest:
Worked example
Say you open a CD with $50,000 at 4.5% annual interest, held for 24 months (2 years).
- Convert the rate to a decimal: r = 4.5 ÷ 100 = 0.045.
- Convert the time to years: 24 months ÷ 12 = 2 years.
- Apply the formula: I = 50,000 × 0.045 × 2 = $4,500.
- Total at maturity: A = 50,000 + 4,500 = $54,500.
A smaller example: borrow $1,000 at 5% for 3 years. Interest is I = 1,000 × 0.05 × 3 = $150, and the total you'd repay is A = $1,150.
Converting time to years
Simple interest rates are almost always quoted per year, so any other time unit needs converting first:
| Given in | Convert to years |
|---|---|
| Months | ÷ 12 |
| Quarters | ÷ 4 |
| Days (365-day year) | ÷ 365 |
| Days (360-day banking year) | ÷ 360 |
Common mistakes
- Forgetting to convert the rate. A 4.5% rate is r = 0.045, not 4.5, in the formula — this calculator does that conversion for you, but it's worth checking by hand once.
- Forgetting to convert time to years. If the rate is annual, time must be in years too.
- Confusing simple interest with compound interest. Simple interest never re-invests prior interest; compound interest does.
- Using simple interest for an amortizing loan. A real installment loan's principal shrinks with each payment, so its true interest cost needs an amortization schedule, not this formula — see the loan payment calculator.
Related calculators
For a rate expressed as a fraction of 100, the percentage calculator is useful for double-checking the r = rate ÷ 100 step by hand. If your loan is repaid in equal installments rather than as a single lump sum at the end of the term, the loan payment calculator models that amortization instead.
Frequently asked questions
- What is the formula for simple interest?
- Simple interest is I = P × r × t, where P is the principal, r is the annual interest rate as a decimal (rate ÷ 100), and t is the time in years. Total repayment is A = P + I.
- How is simple interest different from compound interest?
- Simple interest is calculated only on the original principal for the whole term. Compound interest adds each period's interest back into the principal, so later interest is earned on interest already paid — see our compound interest calculator.
- Do I need to convert the interest rate to a decimal first?
- No — enter the rate as a percentage (e.g. 5 for 5%). The calculator divides by 100 internally before multiplying, so r = 5/100 = 0.05.
- What happens if I enter a 0% interest rate?
- A 0% rate is a valid input, not an error. The interest is $0.00 and the total equals the principal — useful for checking a baseline before comparing rates.
- Can I use this for a car loan or student loan?
- Simple interest is common for short-term loans like car loans, student loans, and short-term CDs. For a loan repaid in installments where the balance shrinks each period, use the loan payment calculator instead, which accounts for amortization.
- My time period is in months or days — how do I convert it to years?
- Divide months by 12 (9 months = 9/12 = 0.75 years) or days by 365 (511 days ≈ 1.4 years). Enter the resulting decimal in the time field.
- What does the "total" result mean?
- Total (A) is the principal plus the interest earned or owed: A = P + I. It represents the full amount you'll have (for savings) or owe (for a loan) at the end of the term.