Simple Interest Calculator
Simple interest is calculated only on the original amount, so it grows in a straight line. It is used for short-term loans, some bonds, and many school problems. Enter the principal, the annual rate and the time to see the interest and the final amount.
How to use the simple interest calculator
- Enter the starting amount (principal) and the annual rate.
- Enter the time and choose years or months.
- Read the interest and total; the yearly and monthly interest show the steady growth.
Formula
I = P × r × t, where P is the principal, r is the annual rate as a decimal and t is time in years. Total amount A = P + I.
Worked examples
Three years
$5,000 at 4% for 3 years earns 5,000 × 0.04 × 3 = $600, so the total is $5,600.
Months
$5,000 at 4% for 18 months (1.5 years) earns $300.
Where simple interest is used
Simple interest appears in short-term loans, some car and personal loans, certain bonds and certificates, and in many school exercises. Because it does not compound, it is easy to predict: the same amount is added each year.
Simple versus compound over time
| $5,000 at 4% | Simple | Compound yearly |
|---|---|---|
| 3 years | $5,600.00 | $5,624.32 |
| 10 years | $7,000.00 | $7,401.22 |
| 30 years | $11,000.00 | $16,216.99 |
Solving for other variables
Rearrange I = P × r × t to find any unknown: P = I ÷ (r × t), r = I ÷ (P × t), t = I ÷ (P × r). For example, if $600 interest was earned on $5,000 in 3 years, the rate is 600 ÷ (5,000 × 3) = 4%.
Borrowing versus saving
When you borrow, simple interest is cheaper than compound interest at the same rate. When you save, the opposite is true. Always check how a product calculates interest before you sign, and compare total cost using the APR.
Practice problems
Try these yourself first, then check your answer. The answers come from the calculator above.
- What interest does $8,000 earn at 3.5% over 4 years?
Show answer
Interest earned: $1,120.00
- What interest does $1,200 earn at 6% over 9 months?
Show answer
Interest earned: $54.00
Common mistakes to avoid
- Using months as if they were years. Convert months to years by dividing by 12.
- Confusing simple with compound interest, which grows faster over time. Try the compound interest calculator to compare.
Frequently asked questions
What is simple interest?
Interest earned only on the original principal, not on previously earned interest.
How is it different from compound interest?
Compound interest is also earned on past interest, so growth accelerates. See the compound interest calculator.
Where is simple interest used?
Short-term personal loans, some car loans, treasury bills and textbook problems.
Is this financial advice?
No, it is an educational estimate.
Reviewed September 26, 2026 by the SolveCalcPro editorial team. Found a mistake? Tell us; see our editorial policy.