Simple interest is charged on the original principal only: Interest = Principal × Rate × Time, and the end balance is the principal plus that interest. The same amount is added every period because interest never earns interest. For interest that earns interest, use the Compound Interest Calculator.
Quick answers
A practical guide to simple interest
What simple interest calculates
Simple interest is the interest charged on the original principal only — the amount you started with — for the whole length of the loan or deposit. It never earns interest on past interest, so the amount added each period stays the same. That makes it easy to predict: if $10,000 earns $500 of interest in the first year, it earns exactly $500 in every later year too.
This calculator works out the four quantities that describe a simple-interest situation: the principal, the rate, the time, and the resulting interest and end balance. Tell it any three and it solves for the fourth, and it shows the per-period interest, a balance schedule, and how the same rate would behave if it compounded instead.
The simple interest formula
The core formula is Interest = Principal × Rate × Time, often written I = P × r × t. The rate and the time must use the same period: an annual rate with a number of years, a monthly rate with a number of months, or a daily rate with a number of days. The end balance, or maturity value, is simply A = P + I = P × (1 + r × t).
From that one formula every other answer follows by rearranging it. The principal is P = A ÷ (1 + r × t); the rate is r = I ÷ (P × t); and the time is t = I ÷ (P × r). This calculator does the rearranging for you in each mode and shows the substituted numbers so you can follow along or check your own working.
How to calculate simple interest for years
When the rate is annual and the term is in whole years, the math is direct: multiply the principal by the annual rate by the number of years. For example, $5,000 at 6% per year for 3 years earns 5,000 × 0.06 × 3 = $900 in interest, for an end balance of $5,900.
If the term includes part of a year, the same formula still applies with a fractional time. $5,000 at 6% for 2 years and 6 months is 2.5 years, so the interest is 5,000 × 0.06 × 2.5 = $750. Enter the years, months, and days separately and the calculator converts them for you.
How to calculate simple interest for months
If your rate is quoted per month, multiply the principal by the monthly rate by the number of months. $2,000 at 1% per month for 9 months earns 2,000 × 0.01 × 9 = $180. The calculator also reports the annual-equivalent simple rate — here 1% per month is 12% per year — so you can compare it with annual offers.
If your rate is annual but you want a result for a number of months, set the rate to “per year” and enter the months in the term. The tool converts months to a fraction of a year (one month is treated as 1/12 of a year) and applies the annual rate to that fraction.
How to calculate simple interest for days
For a daily rate, multiply the principal by the daily rate by the number of days. Short-term and bridging loans are sometimes quoted this way. The calculator shows the annual-equivalent simple rate as the daily rate × 365, which makes a small-looking daily number easier to judge.
This calculator uses a 365-day year, so one month is treated as 365 ÷ 12 ≈ 30.44 days. Some banks and lenders use a 360-day year or count actual days differently, which can change the interest by a small amount. For exact figures on a real product, use the day-count method stated in its terms.
How to find the principal
If you know the end balance you want and the rate and time, switch to the Principal mode. The calculator rearranges the formula to P = End Balance ÷ (1 + Rate × Time). For example, to end with $12,500 after 5 years at 5% per year, you would need 12,500 ÷ (1 + 0.05 × 5) = 12,500 ÷ 1.25 = $10,000.
This is useful when you are working backwards from a goal — for instance, how much to deposit now to reach a target, or how large a loan corresponds to a known final repayment under simple interest.
How to find the rate
If you know the principal, the end balance, and the time, the Rate mode solves r = Interest ÷ (Principal × Time), where the interest is the end balance minus the principal. Turning $10,000 into $12,500 over 5 years implies 2,500 ÷ (10,000 × 5) = 5% per year.
You can choose whether the answer is expressed per year, per month, or per day, and the calculator always shows the annual-equivalent simple rate alongside it so the figure is easy to compare.
How to find the term
If you know the principal, the end balance, and the rate, the Term mode solves t = Interest ÷ (Principal × Rate). Reaching $2,500 of interest on $10,000 at 5% per year takes 2,500 ÷ (10,000 × 0.05) = 5 years. The result is shown in years, months, and days.
The rate must be above zero to solve the term — at a zero rate no amount of time produces interest. The end balance must also be above the principal for a positive answer, since simple interest cannot turn a smaller balance into a larger one without time at a positive rate.
Simple interest vs compound interest
The key difference is what the rate is applied to. Simple interest always applies the rate to the original principal, so the interest added each period is constant and the balance grows in a straight line. Compound interest applies the rate to the running balance, so past interest earns interest too and the balance curves upward over time.
Over short periods the two are close, but the gap widens the longer the money is invested or borrowed and the higher the rate. At 5% for 5 years, $10,000 grows to $12,500 with simple interest but about $12,762.82 if it compounds once a year — a difference of $262.82. The comparison card on this page shows this for your own numbers; for full compounding, frequencies, and contributions, use the Compound Interest Calculator.
Where simple interest is commonly used
Simple interest shows up in many short-term and fixed arrangements: some car and personal loans, short-term and bridging loans, certain bonds and certificates, promissory notes, and many textbook and exam problems. It is also a clear way to quote interest when the term is short enough that compounding makes little difference.
Most everyday savings accounts, credit cards, and mortgages use compound interest instead, because interest is added to the balance regularly. Always read the product’s terms to see which method, period, and day-count it uses — the wording “simple interest” or “compounded monthly/daily” tells you which calculator to reach for.
When this calculator should not be used
Do not use this tool when interest compounds — for savings accounts that add interest monthly, credit cards, or most mortgages — because it would understate how the balance grows. For those, use the Compound Interest Calculator or the Savings Calculator. It also does not model regular deposits or withdrawals, changing rates, fees, taxes, or penalties.
It is an educational estimate, not a quote or a statement. For an exact figure on a real loan or deposit, use the rate, period, day-count convention, and fees stated in the product’s own terms, and confirm with the lender or bank.
Worked examples
1. End balance from principal, rate, and time
A $10,000 deposit at 5% per year for 5 years earns 10,000 × 0.05 × 5 = $2,500 in interest, so the end balance is $12,500. Because it is simple interest, exactly $500 is added each year.
2. Finding the principal
To reach $12,500 after 5 years at 5% per year, you would need 12,500 ÷ (1 + 0.05 × 5) = 12,500 ÷ 1.25 = $10,000 to start with.
3. A monthly rate over months
A $2,000 short-term loan at 1% per month for 9 months charges 2,000 × 0.01 × 9 = $180 in interest. That 1% per month is an annual-equivalent simple rate of 12% per year.
4. Simple vs compound
The same $10,000 at 5% for 5 years reaches $12,500 with simple interest, but about $12,762.82 if it compounds once a year — a difference of about $262.82. The gap grows with longer terms and higher rates.
Assumptions & limitations
Assumptions
- Interest is charged on the original principal only and does not compound.
- A 365-day year is used: 1 year = 12 months = 365 days, so 1 month ≈ 30.44 days. The number of periods is the term in years × periods per year.
- The rate and the term are matched: an annual rate uses years, a monthly rate uses months, a daily rate uses days; the annual-equivalent simple rate is the rate × periods per year.
- Each schedule period adds the same interest; cumulative interest is rounded to the cent so the final balance matches the end balance exactly.
- No taxes, fees, penalties, inflation, prepayments, or rate changes are included.
Limitations
- Real products may use a 360-day year or actual/actual day counts, which changes daily and monthly figures slightly.
- Most savings, credit cards, and mortgages compound — this tool is for simple interest only.
- It does not handle regular contributions, withdrawals, variable rates, or fee schedules.
- Results are educational estimates; verify exact figures with the lender, bank, or a qualified professional.
Not included by default: compounding, regular deposits or withdrawals, taxes, fees, penalties, inflation, and rate changes. For interest that earns interest, use the Compound Interest Calculator; for an exact figure on a real product, follow its own terms and day-count.