A simple interest calculator works out interest on the original principal only: I = P × R × T ÷ 100. For example, $10,000 at 6% for 3 years earns or costs $1,800 in simple interest, for a total of $11,800.
On this page
How to use the simple interest calculator
- Enter the principal.
- Enter the annual interest rate in percent.
- Enter the time in years; use decimals for months or days (6 months = 0.5).
- Read the interest. Add the principal for the total amount.
What is the simple interest formula?
I = P × R × T ÷ 100
- P = principal (the amount borrowed or deposited)
- R = annual interest rate in percent
- T = time in years (months ÷ 12, or days ÷ 365)
The amount at the end is A = P + I = P × (1 + R × T ÷ 100). Interest is charged only on the original principal, so it grows in a straight line with time.
Simple interest calculator worked examples
- $10,000 at 6% for 3 years: I = 10,000 × 6 × 3 ÷ 100 = $1,800; amount = $11,800.
- $5,000 at 8% for 90 days: T = 90 ÷ 365, so I ≈ $98.63. A lender using a 360-day year would charge $100.00 for the same 90 days.
- $2,000 at 5% for 18 months: T = 1.5, so I = $150.
Simple vs compound interest
$10,000 at 6% a year:
| Years | Simple interest | Compound interest (yearly) | Difference |
|---|---|---|---|
| 1 | $600.00 | $600.00 | $0.00 |
| 2 | $1,200.00 | $1,236.00 | $36.00 |
| 3 | $1,800.00 | $1,910.16 | $110.16 |
| 5 | $3,000.00 | $3,382.26 | $382.26 |
| 10 | $6,000.00 | $7,908.48 | $1,908.48 |
| 20 | $12,000.00 | $22,071.35 | $10,071.35 |
For one year the two are equal. After that, compound interest pulls ahead because interest also earns interest. Use the compound interest calculator for savings that credit interest to the balance.
Where simple interest is used
- Car loans and many personal loans: interest accrues daily on the outstanding principal. Each payment pays that interest first, so paying early or extra lowers total interest.
- Short-term notes and some bonds: coupon interest is simple interest on face value.
- Flat-rate loan quotes: some lenders quote interest on the original amount for the whole term. This makes the rate look lower than a reducing-balance APR; compare APRs instead.
Days, months and day-count rules
Convert time to years before using the formula: 6 months = 0.5, 270 days = 270 ÷ 365 ≈ 0.74. Banks and bond markets use set day-count conventions such as actual/365, actual/360 or 30/360, which change the interest slightly. Your loan agreement or account terms state which one applies.
Daily interest on a simple-interest loan
On a simple-interest car loan, interest builds up each day on the balance you still owe. A $20,000 balance at 6% accrues about 20,000 × 0.06 ÷ 365 ≈ $3.29 a day. Paying 10 days late adds roughly $32.88 of interest before any late fee, and paying 10 days early saves about the same. Extra payments cut the principal, which lowers every later day’s interest.
Estimates for education only, not financial advice. Your lender’s figures are final.
Simple interest on a short loan
Short personal loans between family members, some auto title and payday products, and many business invoices use simple interest. Take $5,000 borrowed at 8% for 18 months, a typical case for a simple interest calculator. The simple interest calculator gives 5,000 × 0.08 × 1.5 = $600, so $5,600 is due at the end.
The time must be in years when the rate is yearly. When you use a simple interest calculator, eighteen months is 1.5 years; 90 days is 90 ÷ 365 = 0.2466 years, which gives $98.63 on the same $5,000 at 8%. Entering 18 or 90 as the time is the most common simple interest calculator mistake and makes the result twelve or 365 times too large.
Some lenders quote a fee instead of a rate. A $75 fee on a $500 two-week loan is 15% for 14 days. As a yearly simple rate, that is 15% × 365 ÷ 14, or about 391%. Converting a fee into an annual rate with the simple interest calculator makes offers like this easy to compare with a credit card or a personal loan.
Related converters and calculators
Related tools:
- Compound interest calculator: interest on interest
- Loan calculator: monthly payments
- EMI calculator: reducing-balance loans
- FD calculator: fixed deposits
- APR calculator: true borrowing cost
Sources
Investor.gov (SEC): Compound interest; CFPB: Interest rate vs APR; CFPB: What is amortization?.
Questions about this calculator
What is the simple interest formula?
I = P × R × T ÷ 100, with R the annual rate in percent and T the time in years.
How do I calculate simple interest for months?
Divide the months by 12. For 9 months, T = 0.75.
How do I calculate simple interest for days?
Divide the days by 365, or by 360 if the agreement uses that convention.
Is simple interest better than compound interest?
For a borrower, yes: it costs less over more than one period. For a saver, compound interest earns more.
Do car loans use simple interest?
Many do: interest accrues daily on the outstanding balance, and each payment covers that interest first.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
Report a calculation issue