How to use the simple interest calculator
Enter the principal, the annual interest rate and the time, then choose whether the time is in years, months or days. The calculator shows the simple interest, the total you will pay or receive, and how much interest builds up each year, month and day. If you pick days, you can also choose a 365-day or 360-day year, because loan agreements differ on this.
The last two lines and the table compare the result with compound interest at the same rate, so you can see how much difference compounding makes over your time frame. Nothing you type is sent anywhere; the maths runs in your browser.
The simple interest formula
Simple interest is interest on the principal only. It is not added to the balance, so you never earn or pay interest on interest. The formula is:
I = P × r × t, where I is the interest, P the principal, r the annual rate as a decimal (5% = 0.05) and t the time in years. The total amount is A = P + I = P × (1 + r × t).
For example, $10,000 at 5% simple interest for 3 years earns $10,000 × 0.05 × 3 = $1,500.00, for a total of $11,500.00. That is $500.00 every year, the same amount each year, because the principal never changes.
Time in months is divided by 12: $5,000 at 6% for 18 months is $5,000 × 0.06 × 1.5 = $450.00. Time in days is divided by the days in a year. $20,000 at 7% for 90 days is $345.21 on a 365-day year, or $350.00 on a 360-day “banker's year”, which is why the day count in your agreement matters.
Simple interest vs. compound interest
Compound interest is interest paid on the principal and on interest already earned (Investor.gov (SEC): compound interest; see also CFPB: How does compound interest work?). In the first year the two methods give the same result, but after that compound interest pulls ahead. The Department of Defense's financial readiness site gives a clear example (FINRED (U.S. Department of Defense): Understanding Interest): $10,000 at 4% for 3 years earns $1,200.00 in simple interest but $1,248.64 when interest compounds yearly. Over 40 years the gap becomes $16,000.00 against $38,010.21.
In the default example above, monthly compounding turns the $1,500.00 of simple interest into $1,614.72, $114.72 more. When you are saving, compounding works for you; to see it with regular deposits, try the high-yield savings calculator or the CD calculator. When you are borrowing, the same rate charged as simple interest costs less than compound interest.
Where simple interest is used
Auto loans and many personal loans. The CFPB notes that simple interest, calculated on the outstanding balance daily or monthly, is far more common on auto loans than precomputed interest (CFPB: simple interest vs. precomputed interest on an auto loan). Each payment first covers the interest that has built up since the last payment; the rest reduces the principal. On a $25,000 balance at 7.5%, that is about $5.14 a day, or $154.11 over a 30-day month. Because the balance falls with every payment, use the auto loan calculator or personal loan calculator to see the full payment schedule.
Short-term notes and loans between people. A loan to a friend or family member, a short business note or a bridge loan often states simple interest for a fixed term, with the principal and interest due together at the end. This calculator gives that payoff amount directly.
Some bonds and deposits. Many bonds pay a fixed coupon on their face value, and some CDs pay interest out to you instead of adding it to the balance. In both cases the interest you receive behaves like simple interest, unless you reinvest it yourself.
Solving for the rate, time or principal
The same formula can be rearranged when you know the interest and need one of the other values:
Rate: r = I ÷ (P × t). If $8,000 earns $960 in 3 years, the rate is 4% a year. Time: t = I ÷ (P × r). At 4%, $8,000 takes 3 years to earn $960. Principal: P = I ÷ (r × t). To earn $960 in 3 years at 4%, you need $8,000.
Tips
Check the day count. For short loans, confirm whether interest is figured on 365 or 360 days, and whether it accrues daily. A 360-day year means slightly more interest on the same rate.
Pay early on simple-interest loans. Because interest is charged on the outstanding balance, paying early or paying extra reduces the interest you owe. Paying late does the opposite.
Compare like with like. A simple interest rate and a compounded rate (or an APY) are not the same thing over more than a year. Convert both to the total amount you will pay or receive, as the table here does.
Remember inflation. Interest that stays the same each year buys a little less each year. The US inflation calculator shows how prices have changed.
Updated October 26, 2026 · Sources are linked in the text above · How we build and check our calculators