Simple Interest Calculator

How to work out simple interest

1. Enter the principal, the amount borrowed or invested.
2. Enter the annual interest rate.
3. Enter the time in years.
4. Read the interest and the total amount.

The simple interest formula

Simple interest uses one short formula: interest equals principal times rate times time, often written I = P x r x t. The rate is the annual rate as a decimal, so 4% is 0.04, and time is in years. Because the interest is always based on the original principal, it adds the same amount each year, which makes it easy to calculate simple interest by hand.

Simple versus compound

The key difference is what the interest is charged on. Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest is charged on the principal plus the interest already added, so it grows faster and faster. Short-term loans and some bonds use simple interest, while most savings accounts and long-term loans use compound interest. The interest on a loan of this kind stays flat because it never compounds.

Where simple interest is used

Simple interest often appears on short-term personal loans, car loans in some regions, and certain fixed deposits or bonds. It is also the model taught first in school because the maths is clean. For anything that runs for many years, check whether the real product compounds, since that changes the total.

An estimate, not financial advice

This is a straightforward calculation from the numbers you enter. A real loan or account may compound, charge fees, or use a different day count, so confirm the actual terms. This is not financial advice.

FAQ

How do I calculate simple interest?

Multiply the principal by the annual rate and by the time in years: I = P x r x t. The tool does this and also shows the total amount, which is the principal plus the interest.

What is the difference between simple and compound interest?

Simple interest is charged only on the original principal, so it is the same each year. Compound interest is charged on the principal plus past interest, so it grows faster over time.

Is a car loan simple interest?

Many are, especially over short terms, but it varies by lender and country. Check your loan agreement, since some use compound interest or add fees.

Can time be in months?

This tool uses years, so enter months as a fraction, for example six months as 0.5. The formula scales the interest to the time you enter.

Is my information private?

Yes. Everything is calculated in your browser and nothing you enter is uploaded or saved.