Simple Interest Calculator

Year three earns the same interest as year one: $250. That flat line is the signature of simple interest.

Most bank accounts and loans compound. But some things still use simple interest: certain short-term loans, some bonds, and plenty of school textbook problems. The math is short and honest. You lend $5,000 at 5% for 3 years, you earn $750.  No surprises, no compounding curve to untangle.

Three inputs, two answers.

I = P × r × t, and that is the whole trick

I = P × r × t

I is interest. P is the principal, the starting amount. r is the yearly rate as a decimal, so 5% is 0.05. t is time in years. Total to repay or receive: A = P + I.

The key point: interest is always figured on the original P. Year 3 earns the same interest as year 1. That is the whole difference between simple and compound interest. With compounding, each year’s interest is figured on a growing balance, so the amount climbs.

$5,000 at 5%, three years

Turn the rate into a decimal: 5 ÷ 100 = 0.05. Interest per year: $5,000 × 0.05 = $250.00. Three years: $5,000 × 0.05 × 3 = $750.00. Total: $5,000 + $750.00 = $5,750.00. All figures rounded to the nearest cent. The interest is $250 every year, flat, not growing.

Where it shows up, and where it doesn’t

Most often on short-term loans, some auto loans, certain bonds, and seller-financed deals. Mortgages, credit cards, and most savings accounts use compound interest. If a loan agreement does not say “simple interest” plainly, assume it compounds and read the terms.

• Fixed rate. The rate does not change during the period.
• No compounding. Interest is never added to the balance. If your loan compounds, use the Compound Interest Calculator instead.
• No fees or taxes. Fees, penalties, and taxes on interest are not included.
• Time in years. Months are converted as months ÷ 12. Some lenders count days differently, so check your agreement.

Three quick ones

$2,000 at 3% for 2 years: interest $120.00, total $2,120.00.

$12,000 at 6% for 5 years: interest $3,600.00, total $15,600.00.

Compare with compounding: $10,000 at 5% for 10 years earns $5,000 in simple interest. The same money with monthly compounding grows by about $6,470. The gap is the price, or the reward, of compounding.

Quick questions

How do I calculate simple interest?

Multiply the principal by the yearly rate (as a decimal) and by the time in years. That is it: I = P × r × t. Add the interest to the principal to get the total. The calculator above does the same math, including the months-to-years conversion.

What is the difference between simple and compound interest?

Simple interest is charged only on the original amount, so it stays flat each year. Compound interest is charged on the balance including past interest, so it grows over time. On savings, compounding pays you more. On debt, compounding costs you more. See our Compound vs Simple Interest guide for a side-by-side example.

How do I handle months instead of years?

Divide the months by 12. Six months is 0.5 years, 18 months is 1.5 years. A $4,000 loan at 6% for 6 months costs $4,000 × 0.06 × 0.5 = $120 in simple interest.

Nearby tools

The Compound Interest Calculator covers interest on a growing balance, the more common case. The Savings Goal Calculator finds the monthly deposit behind a savings target. The Loan Calculator works out monthly payments on a real auto or personal loan. The Percentage Calculator handles rate changes and percentages. The Mortgage Calculator covers home loans, which compound monthly. Compound vs Simple Interest compares the two side by side. Or browse All Finance Calculators and All Calculators.

General information only, not financial advice. Loan terms, fees, and day-count rules vary, so check your agreement or talk to a qualified professional before making a decision.

No external source needed for this page, the formula is standard arithmetic.

By Lucas Meyer · Last updated 15 October 2026