Simple Interest Calculator

How to Use This Calculator

1. Enter the Principal Amount — the starting loan or investment amount.
2. Enter the Annual Interest Rate.
3. Enter the Time Period in years — use decimals for partial years.
4. See the Simple Interest earned and Total Amount instantly.

Formula

Example

Frequently Asked Questions

• What is simple interest? ▼
  Simple interest is calculated only on the original principal, not on accumulated interest. Formula: I = P × R × T. For example, $5,000 at 6% for 3 years earns $5,000 × 0.06 × 3 = $900 in simple interest.
• When is simple interest used? ▼
  Simple interest is used for short-term loans, auto loans, some personal loans, and US Savings Bonds. Most bank accounts and mortgages use compound interest. Short-term same-day loans may use daily simple interest.
• What is the difference between simple and compound interest? ▼
  Simple interest is calculated on principal only. Compound interest is calculated on principal plus previously earned interest. Over long periods, the difference is substantial. $5,000 at 6% for 20 years: simple = $6,000 interest, compound (annual) = $9,036.
• How do I solve for rate or time using simple interest? ▼
  Rate = I ÷ (P × T). Time = I ÷ (P × R). For example, if $5,000 earns $900 in 3 years: Rate = $900 ÷ ($5,000 × 3) = 6% per year.
• Do most loans use simple or compound interest? ▼
  Most consumer loans (mortgages, student loans, credit cards) use compound interest, not simple interest. Auto loans often use simple interest calculated daily. Always clarify with your lender which method applies.

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