Simple Interest Calculator

Interest = Principal × Annual Rate × Term in Years

Example: A $1,000 principal at a 5% interest rate for 3 years accrues $150 in simple interest, totaling $1,150.

Quickly determine interest accrued or total balance on a loan or savings account. Adjust rate, time, and principal inputs using the interactive widget below.

Interactive Simple Interest Calculator

Principal Amount ($)

Annual Interest Rate (%)

Time Period (Years)

Interest Earned $150.00

Total Balance $1,150.00

How Simple Interest Works

Unlike compound interest, simple interest does not accumulate on top of past interest earnings. It is calculated solely as a flat percentage of the starting principal balance.

Interest (I) = P × R × T

This formula is standard for short-term personal loans, car loans, and certificates of deposit (CDs) that pay out earnings directly.

Compound vs. Simple Interest

Simple interest yields the same return every year. For example, a 5% rate on $1,000 earns exactly $50 every single year.

Compound interest pays interest on your interest, causing the account to grow exponentially. Over long investment terms, compound interest yields significantly higher payouts than simple interest.

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Frequently Asked Questions

What is the simple interest formula?

The simple interest formula is: Interest (I) = Principal (P) × Rate (R) × Time (T), where P is the starting amount, R is the annual interest rate (in decimal form), and T is the time period in years.

How is simple interest calculated monthly?

To calculate simple interest monthly, convert the monthly term into years by dividing the number of months by 12. For example, a 6-month term is 6/12 = 0.5 years. Multiply this value by the principal and rate.