Simple Interest Calculator
The textbook interest formula, computed honestly: I = P·r·t, where only the principal ever earns interest. Enter the principal, the annual rate, and the time — in years or in months, converted exactly as months ÷ 12 — to get the interest and the total. Fair warning up front: most real savings accounts and loans compound instead; this tool is for the textbook problems and the contracts that genuinely use simple interest.
Principal, rate, and time
Example: 1,000 at 5% for 3 years → interest 150, total 1,150; 1,000 at 4% for 18 months → interest 60.
The formula, worked through
I = P × r × t with the rate as a decimal and the time in years. The worked example — 1,000 at 5% for 3 years — is 1,000 × 0.05 × 3 = 150, for a total of 1,150; both figures were computed at build time by the same engine behind the form. Months convert exactly before the multiplication: 18 months is t = 1.5, never a rounded 1.4 or 1.6, which is how 1,000 at 4% for 18 months lands on precisely 60. Simple interest is linear — double the time, double the interest — and that linearity is its defining difference from compounding.
Simple versus compound, honestly
Simple interest pays on the principal alone, forever. Compound interest pays on the principal plus accumulated interest, so the balance grows faster every period — and most financial products in the wild (savings accounts, credit cards, mortgages) compound. Use this page when the arrangement actually specifies simple interest: homework and exam problems, many short-term and auto loans, judgment interest, accrued bond interest, or a written agreement between individuals. When your question is compound — "what annual rate turns 10,000 into 15,000 in five years?" — that is the CAGR calculator's territory, and percentage changes without a time dimension belong to the percentage calculator.
Frequently asked questions
What is the simple interest formula?
I = P × r × t: principal times the annual rate (as a decimal) times the time in years, and the total repaid or received is P + I. For 1,000 at 5% over 3 years, that is 1,000 × 0.05 × 3 = 150 interest and a 1,150 total.
How is simple interest different from compound interest?
Under simple interest, only the original principal ever earns interest — 5% on 1,000 is 50 every single year. Under compound interest, accumulated interest itself starts earning: year two pays 5% on 1,050, and the gap widens every period. Over 3 years the difference is small (150 simple vs about 157.63 compounded annually); over 30 years it is enormous.
Which one does my savings account or loan actually use?
Almost certainly compound. Most bank deposits, credit cards, and mortgages compound (daily or monthly is typical), so this calculator would understate what they accrue. Simple interest genuinely applies to the textbook cases and to specific contracts that state it: many short-term personal or auto loans, some bonds’ accrued-interest conventions, court-ordered judgment interest, and informal lending agreements.
How are months handled?
Exactly, as t = months ÷ 12. Eighteen months is t = 1.5 years, so 1,000 at 4% for 18 months earns 1,000 × 0.04 × 1.5 = 60. No day-count convention is involved — the plain formula has no need of one.
Can the rate be zero? Can the time be fractional?
Both. A 0% rate is legal and yields zero interest — useful for checking a promotional no-interest period. Time accepts any positive number of years or months, including fractions like 2.5 years or 4.5 months.
Where do I go for compound growth?
For the reverse question — what annual compound rate turned a start value into an end value — use the CAGR calculator. This page deliberately does not bolt on a compound mode: mixing the two formulas behind one form is how people end up quoting the wrong number.
Values are computed in your browser and never transmitted. This tool is arithmetic for a stated formula, not financial advice — verify any consequential figure against the actual terms of your agreement, which may compound. Details on the methodology page.