Finance
Simple Interest Calculator
Enter any three of principal, rate, time, and interest — the calculator solves for the fourth, shows the final balance, and lays out a year-by-year accrual schedule, live as you type.
Solve for
Interest (I)Solving for this
Computed below ↓
Interest earned
$150.00
Final balance $1,150.00
Substitution
I = P · r · t
$1,000.00 × 0.05 × 3 = $150.00
Principal
$1,000.00
Interest
$150.00
Balance
$1,150.00
Year-by-year accrual
| Yr | + Interest | Balance |
|---|---|---|
| 1 | $50.00 | $1,050.00 |
| 2 | $50.00 | $1,100.00 |
| 3 | $50.00 | $1,150.00 |
Same $50.00 added every full year — that flat line is what makes interest “simple.”
With compound interest the balance would be $1,157.63 — a $7.63 difference.
Updates as you type
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The basics
What is simple interest?
Simple interest is the plainest way to price the use of money: a percentage of the original amount, charged each year, on the original amount only. Because the interest is never added back into the base, every year contributes exactly the same amount — the balance climbs in a straight line. That single idea has two faces.
I = P · r · t
The interest formula
Multiply the principal P by the annual rate r (as a decimal) and the time t in years. The product is the interest accrued over the whole term.
$1,000 × 0.05 × 3 = $150
A = P(1 + r t)
The balance formula
The total you end with is the principal plus the interest. Factor out P and you get the balance in one step — handy when you only care about the final figure.
$1,000 × (1 + 0.05·3) = $1,150
Method
How to calculate it by hand
Four short steps take you from a rate on paper to a balance.
- 1
Convert the rate to a decimal
Divide the percentage rate by 100. A quoted 5% becomes r = 0.05. Skipping this is the most common mistake.
5% ÷ 100 = 0.05 - 2
Put the time in years
If the term is in months divide by 12; if in days divide by 365. The formula expects years.
60 months ÷ 12 = 5 years - 3
Multiply P · r · t
Multiply the principal, the decimal rate, and the time together. The result is the interest I.
20000 × 0.07 × 5 = 7000 - 4
Add it to the principal
Add the interest back to the principal for the final balance you pay or receive.
20000 + 7000 = 27000
Worked examples
See it across real terms
The same procedure handles savings in years, a car loan in months, and a bridge note in days — convert the time, then apply I = P r t.
$1,000 in a simple-interest account at 5% for 3 years.
Given P = $1,000.00, r = 5%, t = 3 years
Apply I = P · r · t: $1,000.00 × 0.05 × 3
Interest = $150.00Balance = $1,150.00
Rearrange
Solve for any variable
I = P r t ties four quantities together. Know any three and a little algebra gives you the fourth — which is exactly what the Solve-for switch on the tool does.
I = P · r · t
Find the interest
The default. Supply the principal, rate, and time and read off what the loan or deposit accrues.
$5,000 × 0.06 × 4 = $1,200
P = I ÷ (r · t)
Find the principal
Work backwards from a target interest figure to the deposit you'd need — useful for savings goals.
$1,200 ÷ (0.06·4) = $5,000
r = I ÷ (P · t)
Find the rate
Given how much interest changed hands, recover the annual rate. Multiply by 100 to read it as a percentage.
$1,200 ÷ ($5,000·4) = 6%
t = I ÷ (P · r)
Find the time
Solve for how long money must sit to accrue a given amount of interest at a known rate.
$1,200 ÷ ($5,000·0.06) = 4y
Where it shows up
Where simple interest is used
Compounding gets the headlines, but plenty of everyday credit still accrues the simple way.
Auto & personal loans
Instalment lending
Many car and personal loans charge simple interest on the outstanding balance, so paying early genuinely reduces what you owe.
Bonds & T-bills
Fixed-income coupons
A bond's coupon is a fixed percentage of face value paid each period — simple interest on the par amount, not on reinvested coupons.
Bridge & merchant notes
Short-term credit
Short bridge loans and merchant advances quote a flat rate over days or weeks, where compounding would barely register anyway.
Quick chart
Simple interest at a glance
Common amounts at common rates. Pick a term and switch between interest-only and the final balance — no typing required.
Term
| Principal | 3% | 5% | 7% | 10% |
|---|---|---|---|---|
| $1,000.00 | $150.00 | $250.00 | $350.00 | $500.00 |
| $5,000.00 | $750.00 | $1,250.00 | $1,750.00 | $2,500.00 |
| $10,000.00 | $1,500.00 | $2,500.00 | $3,500.00 | $5,000.00 |
| $25,000.00 | $3,750.00 | $6,250.00 | $8,750.00 | $12,500.00 |
| $50,000.00 | $7,500.00 | $12,500.00 | $17,500.00 | $25,000.00 |
Simple interest over 5 years using I = P · r · t. Each cell is interest only.
Comparison
Simple vs. compound interest
The difference is whether interest earns interest. On short terms the two are close; the gap widens with every year.
Same base every year
Simple — a straight line
Interest is always a slice of the original principal, so the balance rises by an identical step each year. Predictable, and gentler on a borrower.
Base grows each year
Compound — a curve
Interest is added back, so next year's interest is charged on a bigger balance. The line bends upward and accelerates over long horizons.
Reinvesting the interest instead? Switch to the compound interest calculator to see the curve.
Worth knowing
Rules and pitfalls
A handful of facts that keep simple-interest answers correct.
r is a decimal
Percent, then divide
The formula needs r as a decimal. Forgetting to divide the quoted percentage by 100 inflates the answer a hundredfold.
t must be in years
Match the rate's period
Because the rate is annual, the time has to be annual too. Convert months and days before multiplying.
Interest is linear
Doubling the term doubles the interest
Twice the time means exactly twice the interest, and twice the principal means twice the interest — there are no curves here.
A = P(1 + r t)
Balance in one step
You don't have to compute interest separately; the factored form gives the final balance directly.
Effective rate falls
Below the compound equivalent
Over more than a year, a simple rate yields less than the same rate compounded — the saver loses the interest-on-interest.
Ordinary vs exact
The 360 vs 365 convention
Some lenders use a 360-day “ordinary” year. This calculator uses an exact 365-day year; check which your contract assumes.
Background
A note on where it comes from
Simple interest predates the modern banking system by millennia. Babylonian clay tablets record interest charged as a flat fraction of a grain or silver loan, and Roman and medieval lenders kept to the same linear idea long before compound interest became routine. Its staying power is its honesty: a flat percentage of what was borrowed, owed once for each year the money is out, is the easiest rule for two parties to agree on and check. That is why short notes, many statutory damages, and back-of-the-envelope estimates still reach for it today.
FAQ
Common questions
Simple interest is interest charged only on the original principal, never on the interest that has already accrued. Because the base never changes, the same fixed amount is added each period and the balance grows in a straight line rather than accelerating.
Simple interest is I = P · r · t, where P is the principal, r is the annual interest rate written as a decimal, and t is the time in years. The final balance is the principal plus that interest: A = P + I = P(1 + rt).
Multiply the loan amount by the annual rate (as a decimal) and by the number of years. A $20,000 loan at 7% for 5 years accrues 20000 × 0.07 × 5 = $7,000 of interest, so you repay $27,000 in total.
Simple interest is always based on the original principal, so it adds the same amount every year. Compound interest is based on the principal plus all the interest already earned, so each year is larger than the last. Over long periods compound interest pulls well ahead.
Rearrange the formula. To find the rate, divide interest by principal and time: r = I ÷ (P · t). To find the time, divide interest by principal and rate: t = I ÷ (P · r). Because r is a decimal, multiply by 100 to read it as a percentage. The calculator does this for you via the Solve-for switch.
Convert it to years before applying the formula: divide months by 12 or days by 365. A 90-day note is 90 ÷ 365 ≈ 0.247 years. The calculator's time field has a y / m / d toggle that converts automatically.
Simple interest favours the borrower and works against the saver, because it never lets interest earn interest. For a loan, simple interest means you pay less than you would under compounding; for savings, it means you earn less.
Many car loans, some personal and student loans, and short-term bridge or merchant notes accrue simple interest on the outstanding balance. Mortgages and credit cards, by contrast, typically compound.
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Ugo CharlesBuilt and fact-checked against our editorial standards · Last updated June 2026
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