Simple Interest Calculator
Calculate interest and total repayment on a loan or deposit using the simple interest formula, I = P x r x t. You can also solve for principal, rate, or time if that's the value you're missing.
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Fill in the fields on the left, then click calculate.
Quick Answer
Simple interest is I = P x r x t, where P is the principal, r is the annual rate as a decimal, and t is the time in years. Add the interest to the principal (A = P + I) to get the total amount owed or earned.
How It Works: Formula & Variables
I = P × r × t | A = P + I
- P (Principal)
- The original amount borrowed, deposited, or invested.
- r (Rate)
- The annual interest rate, entered as a percentage and converted to a decimal internally.
- t (Time)
- The length of the loan or deposit, in years. Months need to be divided by 12 first.
- A (Total)
- The principal plus the interest, or the full amount owed or paid out at the end.
Rearranged for the other variables: P = I ÷ (rt), r = I ÷ (Pt), t = I ÷ (Pr).
Source: CFPB, simple interest versus precomputed interest on an auto loan.
Worked Examples
Example 1: $5,000 at 4% for 3 years
I = 5,000 × 0.04 × 3 = $600.00. Add that to the principal and the total comes to $5,600.00.
Example 2: $1,100 for 5 months at 5%
Five months is 5/12 of a year, so t = 0.4167. I = 1,100 × 0.05 × 0.4167 = $22.92 in interest over the loan term.
Key Concepts
Interest only grows on the original amount: Unlike compound interest, the interest you earn or owe in year two doesn't itself start earning interest, so the total grows in a straight line rather than a curve.
Units have to match: The rate and the time period need to be measured the same way. An annual rate paired with a time in months, without converting, will give a wrong answer that's 12 times too small.
It's common on short-term borrowing: Simple interest shows up most on short loans and certain notes and bonds, where the lender isn't trying to compound returns over a long stretch.
Common Mistakes
Mixing time units: Plugging in 9 (months) as if it were years, next to an annual rate, is the single most common error with this formula.
Assuming simple interest behaves like compound interest: Over a few years the gap is small, but over a decade or more, treating a compound account as if it grows in a straight line badly underestimates it.
Entering the rate as a whole number: Typing 4 into a spreadsheet formula that expects 0.04 will overstate the interest by 100 times. This calculator handles that conversion for you, but it's worth knowing if you're doing the math by hand.
Frequently Asked Questions
Simple interest is calculated only on the original principal, never on interest that's already been earned. It's the plainest way to figure out what a loan or deposit will cost or pay, because the math never changes year to year.
Simple interest grows in a straight line, using the formula A = P(1 + rt). Compound interest grows faster because it charges interest on interest, using A = P(1 + r/n)^(nt). On $5,000 at 4% over 3 years, simple interest comes out to $600, while the same rate compounded monthly earns $636.36 instead.
You mostly see it on short-term loans, some auto loans, and a number of bonds and notes that don't compound. Most everyday savings accounts and credit cards use compound interest instead.
Divide the number of months by 12. Simple interest only works correctly when the rate and the time period use the same unit, so a 9-month loan needs to be entered as 9/12, or 0.75, years.
Type in the percentage as you'd normally say it, so 4 for 4%. The calculator converts it to a decimal behind the scenes before running the formula.
Yes. Pick what you're solving for from the dropdown, and the calculator rearranges the formula for you: P = I/(rt) for principal, r = I/(Pt) for rate, and t = I/(Pr) for time.
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