Simple Interest Calculator
Calculate simple interest instantly. Enter your principal, annual rate, and time period in years, months, or days to see total interest earned, daily and monthly interest, and a full year-by-year breakdown.
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Provide your principal, annual interest rate, and time period to calculate simple interest.
Results
| Principal | — |
|---|---|
| Annual Rate | — |
| Time Period | — |
| Simple Interest | — |
| Total Amount | — |
| Daily Interest | — |
| Monthly Interest | — |
Year-by-Year Breakdown (max 50 rows)
| Year | Interest | Total Balance |
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Understanding Simple Interest
Simple Interest Formula
Simple interest is calculated solely on the original principal. The formula is:
SI = P × R × T
Where P = Principal, R = Annual rate (as a decimal), T = Time in years. The total amount returned is A = P + SI.
- Principal (P) — the original amount invested or borrowed.
- Rate (R) — the annual interest rate; divide by 100 to convert from percentage.
- Time (T) — the duration in years; divide months by 12 or days by 365.
Simple vs Compound Interest
Simple interest grows linearly — the same dollar amount of interest accrues each year, making it easy to predict and budget.
Compound interest grows exponentially — interest is added to the principal each period, and future interest is calculated on the new, larger balance. Over long periods this leads to significantly higher totals.
- For a $5,000 loan at 6% over 3 years: simple interest = $900, compound interest ≈ $955.
- The gap widens dramatically over longer periods and higher rates.
- As a borrower, simple interest is cheaper; as an investor, compound interest earns more.
When Is Simple Interest Used?
Simple interest is the standard calculation method in many real-world financial products, particularly for short-term transactions where compounding would have minimal effect.
- Car loans — most auto loans in the US use daily simple interest.
- Personal loans — short-term instalment loans commonly use simple interest.
- U.S. Treasury bills — short-term government securities use a simple interest discount method.
- Savings bonds — some fixed-term bonds calculate interest on the original principal only.
- Payday loans — though expensive, the fee structure mirrors simple interest logic.
Real-World Examples
Seeing the formula in action helps build intuition for how simple interest works across different scenarios.
- Savings: $10,000 at 4% for 5 years → SI = $10,000 × 0.04 × 5 = $2,000. Total = $12,000.
- Car loan: $20,000 at 7% for 3 years → SI = $20,000 × 0.07 × 3 = $4,200. Total = $24,200.
- Short-term: $1,000 at 5% for 6 months → SI = $1,000 × 0.05 × (6/12) = $25. Total = $1,025.
- Daily: $5,000 at 6% for 90 days → SI = $5,000 × 0.06 × (90/365) ≈ $73.97.
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What is simple interest?
Simple interest is a method of calculating interest where the charge is based only on the original principal, not on any previously accumulated interest. The formula is SI = P × R × T, where P is principal, R is the annual rate (as a decimal), and T is time in years. It grows linearly — the same dollar amount accrues each year.
What is the difference between simple interest and compound interest?
With simple interest, only the original principal earns interest — the amount is the same every period. With compound interest, accumulated interest is added back to the principal, so you earn interest on interest. Over time, compound interest grows much faster. For a $10,000 investment at 5% over 10 years: simple interest yields $5,000 in interest, while annual compounding yields about $6,289.
What is the simple interest formula?
SI = P × R × T, where SI = Simple Interest earned, P = Principal (original amount), R = Annual interest rate divided by 100, T = Time in years. To find the total amount: A = P + SI. For time in months, use T = months / 12. For days, use T = days / 365.
When is simple interest used?
Simple interest is used in many everyday financial products: most U.S. car loans use daily simple interest, short-term personal loans are often simple interest, U.S. Treasury bills use a simple interest discount method, and some fixed deposits or savings bonds pay simple interest on the original principal only. It is preferred when the term is short and simplicity and predictability matter.
How do I calculate simple interest manually?
Multiply the principal by the rate (as a decimal) by the time in years. Example: $5,000 at 6% for 3 years — SI = 5,000 × 0.06 × 3 = $900. Total = $5,900. For 18 months at 5%: SI = 5,000 × 0.05 × (18/12) = $375. Total = $5,375. For 90 days at 6%: SI = 5,000 × 0.06 × (90/365) ≈ $73.97.