How simple interest calculator works
Simple interest is interest calculated only on the original principal, not on accumulated interest. The formula is straightforward: interest equals principal times annual rate times time (I = P × r × t), with the rate expressed as a percentage. The total you repay or receive is the principal plus the interest.
Enter the principal amount, the annual interest rate as a percentage, the time period, and the unit of time (years, months, or days). The calculator converts months and days into a fraction of a year — months divide by 12 and days divide by 365 — before applying the formula, so the rate always stays annual.
Simple interest is used for short-term loans, some car loans, promissory notes, and basic savings. Most mortgages and credit cards use compound interest instead, where interest earns interest over time. Use the related Compound Interest Calculator for those cases.
Frequently asked questions
What is the simple interest formula?
I = P × r × t, where P is the principal, r is the annual interest rate as a decimal, and t is the time in years. The total amount is P + I. For a rate of 5%, use 5 (not 0.05) — the calculator applies the /100 for you.
How are months and days handled?
The rate is always annual. For months the time is divided by 12, and for days it is divided by 365, before applying the formula. So 6 months at 6% on $1,000 gives $30 in interest, the same as half a year.
Simple vs compound interest — what is the difference?
Simple interest is charged only on the original principal. Compound interest is charged on the principal plus any accumulated interest, so it grows faster. Short-term loans often use simple interest; savings accounts and credit cards usually compound.
Can the rate or time be negative?
No. The principal and time must be positive, and the rate is a percentage that can be zero but not nonsensical. A negative rate would mean you pay the lender to hold your money, which is not supported here.