How to use the Simple Interest Calculator
- Choose what to solve for: interest, rate, time or principal.
- Fill in the other values. Time can be in days, months or years; for days, pick a 365- or 360-day year.
- Read the answer, the total amount and the interest per year, which update as you type.
- Compare the result with yearly compounding and check the year-by-year table.
Features
- Solve for interest, rate, time or principal
- Time in days, months or years, with a 365 or 360-day year
- Total amount and interest per year
- Comparison with yearly compound interest
- Year-by-year table with CSV download
The simple interest formula
Simple interest is calculated only on the original amount, never on interest already earned. The formula is I = P × R × T ÷ 100, where I is the interest, P the principal, R the yearly rate in percent and T the time in years. The total repaid or received is A = P + I.
Rearranging the same formula finds any missing value:
- Rate: R = I × 100 ÷ (P × T)
- Time: T = I × 100 ÷ (P × R)
- Principal: P = I × 100 ÷ (R × T)
Worked examples
- 10,000 at 5% for 3 years: I = 10,000 × 5 × 3 ÷ 100 = 1,500, so you get back 11,500.
- You earned 600 on 8,000 over 18 months (1.5 years). The rate is 600 × 100 ÷ (8,000 × 1.5) = 5% a year.
- How long does 20,000 at 6% take to earn 3,000? T = 3,000 × 100 ÷ (20,000 × 6) = 2.5 years.
Converting days and months
The rate is always yearly, so time must be expressed in years. Months are divided by 12. Days are divided by the number of days in a year, and there are two conventions:
| Method | Days in year | Interest on 50,000 at 8% for 90 days |
|---|---|---|
| Exact interest (actual/365) | 365 | 986.30 |
| Ordinary or banker’s interest (actual/360) | 360 | 1,000.00 |
The 360-day year gives slightly more interest and is common in some commercial lending and money markets. Personal savings and most consumer calculations use 365. Check your agreement if the exact figure matters.
Simple versus compound interest
Simple interest grows in a straight line: the same amount is added every year. Compound interest adds interest on interest, so it pulls ahead over time. On 10,000 at 5% for 3 years, simple interest pays 1,500 while yearly compounding pays 1,576.25. Over 20 years the gap widens to 10,000 versus 16,532.98. The calculator shows this comparison under every result; for long-term savings, use the Compound Interest Calculator.
Where simple interest is used
- Short informal loans between friends, family or small businesses
- Deposits and bonds that pay interest out to you instead of reinvesting it, where each payment is simple interest for that period
- Interest on late invoices, often set as a yearly rate charged per day overdue
- School and exam problems on interest
Common mistakes
- Forgetting to convert months or days into years before multiplying.
- Using a monthly rate as if it were yearly: 1% a month is 12% a year.
- Comparing a simple-interest offer with a compound one without putting both on the same basis.
To count the exact days between two dates, use Days Between Dates. Results are estimates for information only and are not financial advice.
Frequently asked questions
What is the simple interest formula?
I = P × R × T ÷ 100, where P is the principal, R the yearly rate in percent and T the time in years. Add the interest to the principal to get the total amount.
How do I calculate simple interest for months?
Divide the number of months by 12 to get years. For example, 9 months is 0.75 years, so 10,000 at 6% for 9 months earns 10,000 × 6 × 0.75 ÷ 100 = 450.
Should I use 365 or 360 days?
Use 365 unless your loan or deposit agreement says interest is calculated on a 360-day year. The 360-day method gives slightly more interest for the same number of days.
How do I find the rate from the amount repaid?
Subtract the principal from the total repaid to get the interest. Then choose Rate under Solve for and enter the principal, interest and time.
Is simple interest better than compound interest?
For a borrower, simple interest is cheaper; for a saver, compound interest earns more. Over exactly one year with yearly compounding, the two give the same result.