How to use this calculator
- Solve for. Choose Interest to find the interest and the total, Rate to find the annual rate that earns a given amount, or Time to find how long it takes.
- Principal. The amount deposited, invested or borrowed.
- Annual interest rate, interest and time, depending on what you’re solving for. Time can be in days, months or years.
- Day-count basis. When you enter time in days (or solve for time), choose whether a year has 365 days or 360. Check your loan agreement or account terms if you’re not sure.
The results show the working step by step, a comparison with compound interest at the same rate, and a chart of how the two grow apart over time.
The simple interest formula
Simple interest is a fixed percentage of the original principal for each year the money is lent or borrowed:
- I is the interest
- P is the principal
- r is the annual interest rate as a decimal (5% = 0.05)
- t is the time in years (18 months = 1.5; 90 days = 90 ÷ 365 or 90 ÷ 360)
- A is the total amount: principal plus interest
Because the formula has only three moving parts, you can rearrange it to solve for any one of them:
Worked examples
Finding the interest. You lend $10,000 at 5% simple interest for 3 years. I = 10,000 × 0.05 × 3 = $1,500, so you get back $11,500 in total. The interest is the same $500 every year.
Finding the rate. A $10,000 deposit earns $750 of simple interest in 3 years. r = 750 ÷ (10,000 × 3) = 0.025, or 2.5% a year.
Finding the time. At 5%, how long until $10,000 earns $750? t = 750 ÷ (10,000 × 0.05) = 1.5 years: 18 months, or 540 days on a 360-day year.
360-day vs 365-day year
When time is counted in days, the result depends on how many days you divide by. Dividing by 365 (often called actual/365) treats each day as 1/365 of a year. Dividing by 360, sometimes called the banker’s year or actual/360, treats each day as 1/360 of a year, so every day’s interest is about 1.4% larger (365 ÷ 360 ≈ 1.0139).
| Example | 365-day year | 360-day year |
|---|---|---|
| $10,000 at 8% for 90 days | $197.26 | $200.00 |
| $25,000 at 7.5% for 270 days | $1,386.99 | $1,406.25 |
The 360-day convention is common in commercial lending and some short-term investments. If you’re comparing two loans with the same quoted rate, one figured on 360 days costs slightly more. Your loan documents should say which basis applies.
Simple vs compound interest
With simple interest, the interest each year is the same. With compound interest, interest is added to the balance and earns interest of its own. At the same 5% rate on $10,000:
| Years | Simple interest | Compounded annually | Compounded monthly | Extra from monthly compounding |
|---|---|---|---|---|
| 1 | $500.00 | $500.00 | $511.62 | $11.62 |
| 3 | $1,500.00 | $1,576.25 | $1,614.72 | $114.72 |
| 5 | $2,500.00 | $2,762.82 | $2,833.59 | $333.59 |
| 10 | $5,000.00 | $6,288.95 | $6,470.09 | $1,470.09 |
| 20 | $10,000.00 | $16,532.98 | $17,126.40 | $7,126.40 |
| 30 | $15,000.00 | $33,219.42 | $34,677.44 | $19,677.44 |
Over a year or two the difference is small. Over 30 years, compound interest earns more than twice as much. For savings with regular deposits, use the compound interest calculator; to grow a lump sum and a payment stream together, try the future value calculator.
The results also show an equivalent compound rate: the annually compounded rate that would produce the same total over the same time. For 5% simple interest over 3 years it’s about 4.769%, which is why a simple-interest quote looks better than it is for long periods.
Where you’ll see simple interest
- Auto and personal loans. Many installment loans accrue interest daily on the outstanding principal. Each payment covers the interest built up since the last one, and the rest reduces principal. Paying a few days early saves a little interest; paying late costs a little more. The loan calculator shows a full payment schedule.
- Bonds. A bond’s coupon is simple interest on its face value: a $1,000 bond with a 4% coupon pays $40 a year, whatever happens to its market price.
- Short loans between people or businesses. A note for a few months is often written with simple interest because it’s easy to check.
- Accrued interest. Interest that has built up between payment dates is usually figured with simple interest for the days elapsed.
Savings accounts and CDs almost always compound, and they advertise an APY that includes the compounding. The APY calculator converts between a stated rate and its yield.
Assumptions & limitations
The calculator applies one fixed annual rate to an unchanging principal for the whole period, with no deposits, withdrawals or payments along the way. Months are treated as twelfths of a year. On an amortizing loan the principal falls with each payment, so total interest is less than I = Prt on the original balance would suggest. Results are before any taxes or fees.
Sources
These results are estimates for education and comparison. Your lender’s or bank’s disclosures are what count.
Frequently asked questions
What is the formula for simple interest?
Simple interest is I = P × r × t, where P is the principal, r is the annual rate as a decimal and t is the time in years. The total you end up with (or owe) is A = P + I, which is the same as P(1 + rt). Interest is only ever charged on the original principal, never on interest already earned.
How do I calculate simple interest for a number of days?
Divide the days by the number of days in a year to get t, then use I = P × r × t. On a 365-day year, 90 days at 8% on $10,000 earns $197.26. Many commercial loans and money-market instruments divide by 360 instead, which gives $200.00 for the same 90 days.
How do I find the interest rate if I know the interest?
Rearrange the formula to r = I ÷ (P × t). If $10,000 earns $750 in 3 years, the rate is 750 ÷ (10,000 × 3) = 0.025, or 2.5% a year. Choose “Rate” at the top of the calculator to do this automatically.
How long does it take to earn a certain amount of simple interest?
Use t = I ÷ (P × r). At 5%, $10,000 takes 750 ÷ (10,000 × 0.05) = 1.5 years to earn $750. The calculator also shows the answer in months and days.
Is simple interest better than compound interest?
It depends on which side you’re on. If you’re borrowing, simple interest costs less because interest never builds on interest. If you’re saving, compound interest earns more, and the gap grows with time. On $10,000 at 5%, monthly compounding earns $114.72 more than simple interest over 3 years and $1,470.09 more over 10.
Which loans use simple interest?
Many auto loans and personal loans are simple interest loans, meaning interest accrues each day on the unpaid principal only. Paying early or paying extra reduces the principal sooner, so less interest builds up. Your loan contract states how interest is figured.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.