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Simple Interest Calculator

Work out simple interest with I = P × r × t, or find the principal, rate or time, and see each step with your own numbers.

Interest

$150.00

Simple interest on $1,000.00 at 5% for 3 years is $150.00, so the total is $1,150.00.

With compound interest added once a year, the same money would earn $157.63.

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    The simple interest formula

    I=P×r×tI = P \times r \times t

    P is the principal (the amount borrowed or saved), r the yearly rate as a decimal (5% is 0.05) and t the time in years. The total at the end is A = P + I. Rearranged: P = I ÷ (rt), r = I ÷ (Pt) and t = I ÷ (Pr).

    Worked examples

    • Interest: $1,000 at 5% for 3 years earns 1,000 × 0.05 × 3 = $150, so the total is $1,150.
    • Months: $5,000 at 6% for 18 months: 18 months is 1.5 years, and 5,000 × 0.06 × 1.5 = $450.
    • Rate: if $1,000 earns $150 in 3 years, r = 150 ÷ (1,000 × 3) = 0.05, which is 5%.
    • Time: to earn $150 on $1,000 at 5% takes 150 ÷ (1,000 × 0.05) = 3 years.

    Simple or compound interest?

    Simple interest is only ever paid on the original amount, so it grows by the same amount each year. Compound interest is also paid on interest already earned, so it grows faster: $1,000 at 5% for 3 years earns $150 simple but $157.63 compounded yearly, and the gap widens every year. See the compound interest calculator.

    Simple interest is used for some short-term loans, many car loans, and the interest (coupon) payments on bonds. When a loan counts interest by the day, the time is the number of days divided by 365 (or by 360, a convention some banks use).

    Questions

    How do I calculate simple interest for months?

    Divide the number of months by 12 to get years, then use I = P × r × t. For 9 months, t = 0.75.

    Why do some banks divide by 360 days?

    It is an old convention that makes each month 30 days. Dividing by 360 gives slightly more interest than dividing by 365, so check which one your lender uses.

    Is simple interest better for borrowers?

    For the same rate and time, yes: simple interest costs less than compound interest, because you never pay interest on interest.