Simple Interest Calculator
Calculate simple interest and the total amount for a loan or investment based on the principal, annual rate, and time period.
The initial amount of money.
Annual interest rate (e.g. 5 for 5%).
Enter as decimal for partial years.
Simple Interest = P × R × T / 100
Learn More About Simple Interest Calculator
How simple interest is calculated
Simple interest uses a straightforward formula: principal multiplied by rate multiplied by time. Because the interest is calculated only on the original principal, the growth is linear instead of compounding over time.
That makes this calculator useful for quick planning when you want to estimate borrowing cost or investment earnings without compounding.
Example simple interest result
If you borrow $5,000 at 6% simple interest for 3 years, the interest would be $900. Your total repayment would be $5,900 before any fees or penalties.
Running a few scenarios with different rates or time periods can help you compare offers and understand how quickly borrowing costs add up.
Simple interest vs compound interest
The main difference is that compound interest adds interest on top of past interest, while simple interest does not. Over longer periods, compound interest usually leads to a much higher total cost or return.
If you are comparing savings products, loans, or credit offers, it is worth confirming which method is being used before you rely on the estimate.
Frequently Asked Questions
What is simple interest?
Simple interest is interest calculated only on the original principal amount — not on any accumulated interest. It is commonly used for short-term loans, auto loans, and some mortgages. The formula is: Interest = Principal × Rate × Time.
Where is simple interest commonly used?
Simple interest is used for many consumer loans including auto loans, personal loans, and some mortgages in the US. It is also used for Treasury bills (T-bills) and short-term commercial loans. Credit card interest, by contrast, is typically calculated using compound interest.
How do I tell if my loan uses simple or compound interest?
Most loan documents and statements will specify the interest method. Simple interest loans accrue interest evenly across each period. Compound interest loans charge interest on previously accumulated interest, which grows faster over time. If you're unsure, ask your lender.
Does paying early reduce the total interest?
Yes. On a simple interest loan, interest accrues daily. Paying early — before the due date — reduces the principal balance sooner, which means less interest accrues for the remaining period. Making an extra principal payment each year has the same effect.