Simple interest calculator
Calculate simple interest where interest applies only to the original principal — not on accumulated interest. Formula: I = P × r × t (Principal × rate × time).
How to calculate simple interest
1. Enter principal P (initial amount).
2. Enter annual interest rate r as a percent (e.g. 5 for 5%).
3. Enter time t in years (convert months: 6 mo = 0.5 yr).
4. Read interest I and total amount P + I.
Simple interest examples
Basic loan
P = $10,000, r = 6%/yr, t = 3 years → I = 10,000 × 0.06 × 3 = $1,800. Total owed $11,800.
Short-term note
P = $5,000, r = 8%, t = 9 months (0.75 yr) → I = 5,000 × 0.08 × 0.75 = $300.
Compare rates
Same P and t, 5% simple vs 5% compounded — simple pays less interest over multi-year periods.
When to use simple interest
• When you solve textbook finance problems specifying simple interest.
• When you estimate some private short-term loans disclosed as flat simple rates.
• When you compare against compound growth to illustrate compounding effect.
When lenders use simple interest
Some car notes and student promissory notes describe simple interest on declining balance separately from pure I=Prt on fixed principal. Read whether "simple" means formula or "non-compounded" application method.
Frequently asked questions
What is the simple interest formula?
I = P × r × t. r is decimal rate per year; t is time in years.
How do I enter monthly time?
Divide months by 12: 18 months = 1.5 years.
Simple vs compound?
Simple: interest only on P. Compound: interest earns interest — grows faster.
Does rate need to be annual?
Formula assumes annual r with t in years. Convert weekly rates carefully.
Can principal change?
Simple interest model assumes fixed P. Partial repayments need schedule tools.