How to use the simple interest calculator
- Enter the principal, the amount borrowed or invested.
- Enter the annual interest rate as a percent.
- Enter the time and choose whether it is in years, months or days.
- Read the interest earned and the total amount. The steps show the time converted to years.
Formula
I = P x r x t
Total amount A = P + I
t in years = years, or months / 12, or days / 365
P is the principal, r is the annual rate as a decimal (4.5% is 0.045) and t is the time in years. Interest is charged on the original principal only.
Worked examples with $5,000 at 4.5%
3 years: I = $5,000 x 0.045 x 3 = $675.00, so the total is $5,675.00. That is $225.00 of interest per year.
18 months: t = 18 / 12 = 1.5 years, so I = $5,000 x 0.045 x 1.5 = $337.50.
90 days: t = 90 / 365 = 0.246575 years, so I = $5,000 x 0.045 x 0.246575 = $55.48.
Where simple interest is used
Simple interest appears in short-term loans, some bonds and notes, auto loans calculated on a daily basis, and many classroom problems. Because it ignores interest on interest, it grows in a straight line. Doubling the time doubles the interest, and doubling the rate does the same.
The day-count convention
This calculator counts a year as 365 days when you enter time in days, and 12 months when you enter months. Banks sometimes use a 360-day year, which gives slightly more interest for the same number of days. If your contract specifies another convention, convert the days to years yourself and enter the time in years.
Simple versus compound
Over one year the two give the same answer when interest is added once. Over several years compound interest pulls ahead because earned interest also earns interest. Use the compound interest calculator to see how big the gap becomes, or the loan calculator for amortizing loans where payments reduce the balance.
Assumptions and limits
- Interest is charged on the original principal only with no compounding.
- The annual rate is constant for the whole time.
- Days use a 365-day year and months use 12 to a year. No leap-year or 360-day adjustment is made.
- No payments are made during the period. Fees, taxes and penalties are not included.
- Results are rounded to the nearest cent. The time in years is shown to six decimal places.
- This is an estimate, not financial advice.
Frequently asked questions
What is the simple interest formula?
Interest equals principal times the annual rate times the time in years. For example, $1,000 at 6% for 2 years earns $1,000 x 0.06 x 2 = $120.
How do I find simple interest for a number of days?
Divide the days by 365 to get years, then apply the formula. Choose days as the time unit and the calculator does this for you and shows the conversion in the steps.
Is a typical car loan simple interest?
Many are, in the sense that interest accrues on the unpaid balance, but each payment reduces the balance, so the total is not principal times rate times time. Use the car payment calculator for those loans.
Can I find the rate or time instead?
This tool solves for the interest and total. To find another value, rearrange the formula: rate = I / (P x t), time = I / (P x r), principal = I / (r x t).