Why use Simple Interest Calculator
Simple interest is principal × rate × time ÷ 100. It is charged on the original sum only, never on interest already added, so it grows by the same amount every year. On 10,000 at 7.5% for 3 years the interest is 2,250, the total amount is 12,250 and the interest per year is 750. Enter your own three numbers and the calculator returns those three results plus a Working panel that writes the formula out with your values in place, which is useful for checking a loan agreement or laying out a homework answer. Time is entered in years and accepts decimals for months.
Simple interest formula, with the rearrangements for P, R and T
SI = (P × R × T) ÷ 100 Total amount A = P + SI P = (SI × 100) ÷ (R × T) R = (SI × 100) ÷ (P × T) T = (SI × 100) ÷ (P × R)
P is the principal, R the annual rate in percent and T the time in years. The calculator solves the first two lines. The last three are the same equation rearranged, for when you know the interest and need a missing value: if 3,000 earned 540 in 1.5 years, the rate is (540 × 100) ÷ (3,000 × 1.5) = 12% a year. You can confirm a rearranged answer by entering it here and checking that the Interest figure matches.
Simple interest examples with answers
Personal loan between family members
Principal 10000, Annual rate 7.5%, Time in years 3
Interest 2,250.00, Total amount 12,250.00, Interest per year 750.00
Working: (10,000 × 7.5 × 3) ÷ 100 = 2,250.
Six-month deposit
Principal 5000, Annual rate 6%, Time in years 0.5
Interest 150.00, Total amount 5,150.00, Interest per year 300.00
Nine-month certificate at 4%
Principal 10000, Annual rate 4%, Time in years 0.75
Interest 300.00, Total amount 10,300.00, Interest per year 400.00
Fifteen months at a fractional rate
Principal 1500, Annual rate 4.25%, Time in years 1.25
Interest 79.69, Total amount 1,579.69, Interest per year 63.75
Vehicle loan quoted at a flat rate
Principal 12000, Annual rate 11.5%, Time in years 2.5
Interest 3,450.00, Total amount 15,450.00, Interest per year 1,380.00
Four-year business loan
Principal 50000, Annual rate 8.5%, Time in years 4
Interest 17,000.00, Total amount 67,000.00, Interest per year 4,250.00
Months and days converted to years for the time field
The time field is in years only. Convert shorter periods with these values: months ÷ 12, or days ÷ 365.
| Period | Time in years | Interest on 10,000 at 5% |
|---|---|---|
| 1 month | 0.0833 | 41.65 |
| 3 months | 0.25 | 125.00 |
| 6 months | 0.5 | 250.00 |
| 9 months | 0.75 | 375.00 |
| 12 months | 1 | 500.00 |
| 18 months | 1.5 | 750.00 |
| 24 months | 2 | 1,000.00 |
| 30 months | 2.5 | 1,250.00 |
| 36 months | 3 | 1,500.00 |
| 90 days | 0.2466 | 123.30 |
| 180 days | 0.4932 | 246.60 |
The last column is what the calculator returns for the rounded value in the middle column. One month is exactly 1 ÷ 12 of a year, which would give 41.67 where the rounded 0.0833 gives 41.65, so type more decimal places when the pennies matter. Some lenders count a year as 360 days, which raises daily interest slightly.
Simple interest vs compound interest on 10,000 at 5%
Simple interest grows in a straight line. Compounding once a year pulls ahead slowly at first and sharply later.
| Years | Simple interest | Compound interest (annual) | Difference |
|---|---|---|---|
| 1 | 500.00 | 500.00 | 0.00 |
| 2 | 1,000.00 | 1,025.00 | 25.00 |
| 3 | 1,500.00 | 1,576.25 | 76.25 |
| 5 | 2,500.00 | 2,762.82 | 262.82 |
| 10 | 5,000.00 | 6,288.95 | 1,288.95 |
| 15 | 7,500.00 | 10,789.28 | 3,289.28 |
| 20 | 10,000.00 | 16,532.98 | 6,532.98 |
The simple interest column is this calculator's output. The compound column is 10,000 × 1.05 to the power of the years, minus 10,000.
Where simple interest is used, and the flat rate trap
Simple interest is typical of short arrangements where interest is paid out or settled at the end: informal loans between people, short-term notes and bills, deposits that pay interest to a separate account instead of reinvesting it, and interest awarded on overdue invoices or court judgments. Savings accounts, credit cards and most mortgages compound, so this formula understates them over anything but a short period.
Be careful with instalment loans advertised at a flat rate. A flat rate applies simple interest to the full original principal for the whole term, even though you repay part of the principal every month. A 100,000 loan over 5 years at a 6% flat rate carries 30,000 of interest and 130,000 of total repayments. Because your average balance over the term is only about half the amount borrowed, the equivalent rate on a normal reducing-balance loan with the same repayments is about 10.8% a year, not 6%. Compare loan offers on the total amount repayable or on the annual percentage rate, never on a flat rate against a reducing rate.
These figures are for understanding and comparison and are not financial advice.
How to use it
- 1
Enter the Principal: the amount lent, borrowed or deposited.
- 2
Enter the Annual rate as a percentage per year, for example 7.5.
- 3
Enter the Time in years. Use decimals for part years: 0.5 for six months, 1.25 for fifteen months.
- 4
Read Interest, Total amount and Interest per year in the Result panel.
- 5
Read the Working panel to see SI = (P × R × T) ÷ 100 with your numbers substituted, which you can write out if you need to show your steps.