Simple Interest Calculator
Calculate interest charged or earned on a principal amount at a fixed rate, with no compounding.
The formula
Simple Interest = (P × r × t) ÷ 100, where P is the principal, r is the annual rate (%), and t is the time in years. Unlike compound interest, the interest earned each year is always calculated on the original principal only.
Worked example
A principal of 50,000 at 6% annual interest for 3 years earns (50,000 × 6 × 3) ÷ 100 = 9,000 in interest, for a total of 59,000.
Months and partial years
Time has to be entered in years, so turn months into a fraction of a year by dividing by 12. A loan of 20,000 at 4.5% for 18 months uses t = 1.5 years: (20,000 × 4.5 × 1.5) ÷ 100 = 1,350 in interest, for a total of 21,350.
Simple versus compound on the same numbers
Take the 50,000 at 6% for 3 years from the example above. Simple interest earns 9,000. Compounded once a year, the same deposit grows to 59,550.80, which is 9,550.80 of interest and 550.80 more than the simple figure. The gap widens every year because compound interest also earns on interest already added, while simple interest never does.
Reading a loan quote
- Short-term personal loans, some bonds and some vehicle financing are described with simple or flat interest, so check which wording your agreement uses.
- A flat rate is charged on the original amount for the whole term even as you repay, so the true cost of borrowing is higher than the headline rate suggests.
- Savings accounts and long-term loans normally compound; use the Compound Interest Calculator for those.
Examples
5,000 at 8% a year for 3 years earns 1,200.00 in interest, for a total of 6,200.00. For half a year the interest is 200.00, and at a rate of 0% nothing is earned.
Because simple interest is charged only on the original amount, the total grows by the same 400.00 every year. With compound interest the yearly gain would itself grow, which is the difference between the two calculators. The rate is always per year, so a six-month period is entered as 0.5 years and not as a smaller rate. The whole sum is treated as outstanding for the entire period, with no repayments along the way.
Guides
- Flat vs Reducing Rate: How EMI Really Works — Why two loan quotes with the same headline rate can cost very different amounts: how flat and reducing-balance rates convert, where each EMI goes, and what prepaying changes.
- Compound vs Simple Interest and the Rule of 72 — How simple and compound interest differ, why compounding frequency and the effective rate matter, and how far the Rule of 72 can be trusted.
Frequently asked questions
When is simple interest used in practice?
Simple interest is common for short-term loans, certain bonds, and some car loans. Most savings accounts, mutual funds, and long-term loans use compound interest instead.
Does the interest change year to year?
No — with simple interest, the same dollar amount of interest accrues every year, since it's always calculated on the original principal rather than the growing balance.