Simple Interest Calculator
Calculate interest using the I = P * r * t formula. For example, $10,000 at 5% simple interest for 3 years earns $1,500 in total interest - compared to $1,676 with monthly compounding, a $176 difference. See the full monthly breakdown.
Loan / Investment Details
Simple interest: I = P * r * t
Formula: I = $10,000 * 5% * 10 = $5,000
Interest Earned
Includes a comparison with monthly compounding.
Total simple interest
$5,000
$15,000 final amount
Methodology and limitations
Last reviewed:
Methodology
Uses the simple interest formula I = P x r x t and compares it against a basic monthly compounding scenario where supported by the calculator.
Limitations
Useful for formula estimates only. Real loans or accounts may use daily accrual, compounding, fees, grace periods, or different day-count rules.
Official sources
How to Use the Simple Interest Calculator
Calculate interest using the I = P * r * t formula. For example, $10,000 at 5% simple interest for 3 years earns $1,500 in total interest - compared to $1,676 with monthly compounding, a $176 difference. See the full monthly breakdown.
Frequently Asked Questions
What is the simple interest formula?
Simple interest is calculated as I = P * r * t, where P is the principal amount borrowed or invested, r is the annual interest rate expressed as a decimal, and t is the time in years. For example, $10,000 at 5% (0.05) for 3 years earns $1,500 in total interest. The principal never changes - interest is always computed on the original amount. This calculator also shows a month-by-month breakdown of interest accrual.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal throughout the entire loan or investment period. Compound interest is calculated on the principal plus all previously accumulated interest, so the balance grows at an accelerating rate over time. For borrowers, simple interest loans cost less than compound loans at the same stated rate. For savers and investors, compound interest produces significantly more growth. This calculator includes a side-by-side comparison with compound interest.
When is simple interest used in real life?
Simple interest is commonly used for short-term personal loans, some auto loans, treasury bills, and certain bonds where interest does not compound on itself. Many car loans use simple interest calculated daily on the remaining balance, which behaves similarly but accrues differently. Most savings accounts, certificates of deposit, and mortgages use compound interest instead. Knowing which type applies helps you compare the true cost of borrowing or earning on any financial product.
How do I convert an annual rate to a monthly rate?
For simple interest, divide the annual rate by 12 to get the monthly rate. A 6% annual rate equals 0.5% per month (0.06 ÷ 12 = 0.005). Multiply the monthly rate by the principal to find monthly interest: $5,000 * 0.005 = $25 per month. Note that compound interest uses a different conversion formula because each month's interest is added to the balance before the next calculation.
How do I calculate simple interest on a loan?
Enter the loan principal, annual interest rate, and loan term in years or months. The calculator applies I = P * r * t and shows total interest, final balance, and a monthly breakdown. To estimate your total repayment cost, add total interest to the principal. For comparison, toggle the compound interest view to see how much more a compounding loan at the same rate would cost over the same period.