Simple Interest Calculator

Simple interest is interest calculated only on the original principal, never on previously earned interest. It grows in a straight line rather than accelerating. The formula is I = P × r × t, where P is the principal, r is the annual rate as a decimal, and t is the time in years.

Simple interest is always figured on the original principal alone, so the interest each period stays the same. Compound interest is figured on the principal plus all accumulated interest, so it grows faster over time. Simple interest is common for short-term loans, car loans, and some bonds; compound interest applies to most savings and long-term debt.

Multiply the principal by the annual rate (as a decimal) by the time in years. For example, $1,000 at 5% for 3 years is 1,000 × 0.05 × 3 = $150 in interest, for a total of $1,150. If your time is in months or days, this calculator converts it to years for you.

Divide months by 12 or days by 365. For instance, 6 months is 0.5 years and 90 days is roughly 0.247 years. The interest formula requires time in years, so this conversion keeps the rate and time period consistent. Select the unit and the calculator handles it automatically.

Simple interest appears in many car loans, short-term personal loans, some student loans, Treasury bills, and certificates of deposit that pay interest out rather than reinvesting it. It is also used in quick estimates because the math is straightforward.