Simple Interest Calculator
Interest on the principal only — never on the interest. The clean formula behind short-term loans and textbook problems, with the total value and the per-year interest shown.
The formula from the textbook, exactly
Simple interest charges — or pays — interest only on the original principal, for every period, at the same amount. No interest ever earns interest. It governs short-term notes, some auto and retail contracts, most late-fee math, and nearly every exam question on the subject.
Interest = principal × rate × time (I = P × r × t)
Example: $10,000 at 5% for 3 years earns $10,000 × 0.05 × 3 = $1,500 of interest, for a total of $11,500. Compounded annually instead, the same money would reach $11,576.25 — the $76.25 gap is interest-on-interest, visible at small scale.
Where simple interest still runs the world
US federal student loans accrue simple interest daily (on the principal, while in repayment). Tax underpayment and refund interest, many bonds' accrued interest between coupon dates, and most informal lending all follow I = Prt. Knowing which regime you are in is the first step of reading any contract.
How this is calculated
Interest = principal × (rate ÷ 100) × years, with time in years (fractions allowed — 2.5 is two and a half years). The total is principal + interest. No compounding is applied at any frequency; if your arrangement compounds, the compound or general interest calculator is the right tool.
Frequently asked questions
How do I handle months instead of years?
Convert: t = months ÷ 12. Seven months at 6% on $4,000 is 4000 × 0.06 × 7/12 = $140. The form accepts decimal years, so enter 0.5833 for seven months — or just 7/12 as 0.5833.
Simple or compound — which do lenders prefer?
Whichever pays them more for the deal at hand: compound when you owe over long periods (it grows the take), simple in many short and regulated contexts. The contract states the regime; this distinction is why reading it matters.
Is mortgage interest simple or compound?
Effectively simple within each month (interest on the current balance only) — but the balance changes as you pay, producing the amortization pattern, which is its own page here.
Why do schools teach simple interest first?
Because it is linear — double the time or the principal and you double the interest — making it the cleanest possible introduction before compounding's curve bends everything.
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