Simple interest is interest paid only on the original amount — the principal — at a fixed rate for a set time. It never earns interest on itself, which makes it the easiest kind of interest to calculate and a common choice for short-term loans, promissory notes and classroom problems. This calculator solves the formula I = Prt for any one of its four variables.
How to use the simple interest calculator
- Choose what to solve for: interest, principal, rate or time.
- Enter the other three values. Time can be given in years, months or days.
- When time is in days, or when solving for time, pick a 365-day or 360-day year.
- Read the answer, the per-year, per-month and per-day interest, and the table showing how interest builds over time.
Simple interest formulas
Rearranged for each unknown:
- I is the interest in dollars.
- P is the principal.
- r is the annual rate as a decimal (5% = 0.05).
- t is the time in years (months ÷ 12, days ÷ 365 or 360).
Worked examples
Interest: $10,000 at 5% for 3 years → I = 10,000 × 0.05 × 3 = $1,500. You receive or owe $11,500 in total.
Days: the same $10,000 at 5% for 90 days → I = 10,000 × 0.05 × 90 ÷ 365 = $123.29, or $125.00 on a 360-day basis.
Rate: $1,500 of interest on $10,000 over 3 years → r = 1,500 ÷ (10,000 × 3) = 0.05 = 5%.
Time: earning $1,000 on $8,000 at 4% → t = 1,000 ÷ (8,000 × 0.04) = 3.125 years, about 37.5 months.
365-day vs. 360-day years
Lenders do not all count days the same way, and for short periods the difference shows up in the interest:
| Convention | How time is measured | Where it is used |
|---|---|---|
| Actual/365 | Actual days ÷ 365 | Many consumer loans and deposits |
| Actual/360 | Actual days ÷ 360 | Commercial loans, money-market instruments, Treasury bills (discount basis) |
| 30/360 | Every month counts as 30 days | Many corporate and municipal bonds |
Dividing by 360 instead of 365 makes each day slightly more expensive: a stated 5% on an actual/360 basis earns or charges about 5.07% over a full calendar year.
Simple vs. compound interest
Simple interest grows in a straight line — the same $500 every year in the first example. Compound interest adds each period’s interest to the balance, so the next period’s interest is larger. Over three years at 5%, compounding annually turns $10,000 into $11,576.25 instead of $11,500; over 30 years the gap becomes enormous. To see the full accumulated amount and a side-by-side with compounding, use the simple interest plus principal calculator or the compound interest calculator.
Common mistakes
- Entering the rate as a whole number in the formula: 5% must be 0.05 when you calculate by hand.
- Mixing units: a monthly rate needs time in months, an annual rate needs time in years.
- Forgetting that simple interest does not compound — if your account pays interest into the balance, use a compound calculation.
Results are estimates. Your loan or deposit agreement specifies the exact day-count convention and rounding the institution uses.
Frequently asked questions
What is the simple interest formula?
I = P × r × t, where I is the interest, P is the principal, r is the annual interest rate as a decimal and t is the time in years. For $10,000 at 5% for 3 years, I = 10,000 × 0.05 × 3 = $1,500.
How do I find the rate or time with simple interest?
Rearrange the formula. The rate is r = I ÷ (P × t) and the time is t = I ÷ (P × r). For example, earning $1,000 on $8,000 at 4% takes 1,000 ÷ (8,000 × 0.04) = 3.125 years.
How do I use months or days?
Convert the time to years first: divide months by 12, or divide days by 365 (or by 360 if the agreement uses a banker's year). The calculator does this automatically when you pick the unit.
What is the difference between simple and compound interest?
Simple interest is always calculated on the original principal, so it grows by the same amount every year. Compound interest is calculated on the principal plus interest already earned, so it grows faster over time.
Where is simple interest used?
Short-term personal and business loans, many auto loans that accrue interest daily on the balance, US Treasury bills and bond coupons, and some certificates of deposit that pay interest out rather than reinvesting it.