Simple interest calculator

Interest on the original sum only, with no compounding.

Formula Finance

Interest

Total (principal + interest): US$5,600.00

TotalUS$5,600.00

Principal: US$5,000.0089.3%
Interest: US$600.0010.7%

How it works

Simple interest is charged only on the original principal, never on interest already earned. Multiply the principal by the annual rate and by the time in years.

Months are converted at 12 to a year and days at 365 to a year. Some lenders use a 360-day year, which gives slightly more interest for the same number of days.

Formula

I = P × r ÷ 100 × t   (t in years)
Total = P + I
t = months ÷ 12  or  days ÷ 365

Worked example

5,000 at 4% for 3 years earns 5,000 × 0.04 × 3 = 600 of interest, for a total of 5,600.

Questions people ask

When is simple interest used?

In some short-term loans, bonds’ coupon payments, and some car loans and personal loans. Most savings accounts compound instead.

Is simple interest always less than compound interest?

For periods longer than one compounding period, yes. For a single period they are the same.