Simple Interest Calculator
Calculate simple interest on loans or savings. Find total interest earned or owed, and see how simple interest compares to compound interest over time.
Reference table
| Principal Amount | Total Interest | Total Amount (P + I) | Daily Interest |
|---|---|---|---|
| 1,000 | $255.00 | $1,255.00 | $0.23 |
| 2,000 | $510.00 | $2,510.00 | $0.47 |
| 2,500 | $637.50 | $3,137.50 | $0.58 |
| 5,000 | $1,275.00 | $6,275.00 | $1.16 |
| 7,500 | $1,912.50 | $9,412.50 | $1.75 |
| 10,000 | $2,550.00 | $12,550.00 | $2.33 |
| 12,500 | $3,187.50 | $15,687.50 | $2.91 |
| 15,000 | $3,825.00 | $18,825.00 | $3.49 |
| 20,000 | $5,100.00 | $25,100.00 | $4.66 |
| 25,000 | $6,375.00 | $31,375.00 | $5.82 |
| 30,000 | $7,650.00 | $37,650.00 | $6.99 |
| 40,000 | $10,200.00 | $50,200.00 | $9.32 |
| 50,000 | $12,750.00 | $62,750.00 | $11.64 |
| 75,000 | $19,125.00 | $94,125.00 | $17.47 |
| 100,000 | $25,500.00 | $125,500.00 | $23.29 |
Smart Interest Tips
- Simple interest is calculated only on the original principal — you never pay interest on interest.
- Most car loans and personal loans use simple interest — paying early saves you money.
- The 360-day banker's year slightly increases interest vs the standard 365-day method.
- Quick math: $10,000 at 5% for 3 years = $10,000 × 0.05 × 3 = $1,500 interest.
What Is Simple Interest?
How to Calculate Simple Interest (I = Prt)
Important Considerations
- Simple interest is always cheaper than compound interest for borrowers. Over 5 years at 5%, simple = $2,500 vs compound (monthly) = $2,834.
- The 360-day banker's convention increases interest slightly. $10,000 at 6% for 90 days: 365-day = $147.95, 360-day = $150.00.
- Most savings accounts use compound interest, not simple. CDs and bonds are exceptions that may use simple interest.
- Paying a loan early reduces total interest because simple interest only accrues on remaining time.
- The effective annual rate for simple interest equals the stated rate. For compound interest, the effective rate is higher.
- When comparing loans, always check if they use simple or compound interest — the difference grows significantly over time.
Simple Interest Formulas
- Interest: I = P × r × t (principal × rate as decimal × time in years)
- Total Amount: A = P + I = P(1 + rt)
- Find Principal: P = I ÷ (r × t)
- Find Rate: r = I ÷ (P × t) → then × 100 for percentage
- Find Time: t = I ÷ (P × r)
- Time conversion: months ÷ 12 = years | days ÷ 365 = years
Calculation Examples
Step-by-step scenarios
Personal Loan: $10,000 at 8.5% for 3 years
- Principal (P) = $10,000
- Rate: 8.5% ÷ 100 = 0.085
- Time (t) = 3 years
- I = $10,000 × 0.085 × 3 = $2,550
- Total = $10,000 + $2,550 = $12,550
Total interest: $2,550. You pay $70.83/month in interest.
90-Day Note: $5,000 at 12% (Banker's 360)
- Principal (P) = $5,000
- Rate: 12% ÷ 100 = 0.12
- Time: 90 days ÷ 360 = 0.25 years
- I = $5,000 × 0.12 × 0.25 = $150
- Total = $5,000 + $150 = $5,150
Interest: $150. Using 365-day method would give $147.95 instead.
Frequently Asked Questions
What is the simple interest formula?
I = P × r × t, where I = interest, P = principal, r = annual rate as decimal (divide percentage by 100), t = time in years. Total amount is A = P + I.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on principal PLUS accumulated interest. For a $10,000 loan at 5% over 5 years: simple interest = $2,500, compound interest (monthly) = $2,834. The difference grows over time.
What is the 360-day banker's year?
Some banks use a 360-day year (12 months × 30 days) instead of 365 days. This slightly increases interest charged because each day represents a larger fraction of the year (1/360 vs 1/365). Common in commercial loans and Treasury bills.
What types of loans use simple interest?
Auto loans, personal loans, some student loans, payday loans, and certificates of deposit (CDs). Mortgages, credit cards, and savings accounts typically use compound interest.
How do I calculate interest for months?
Divide months by 12 to get years. Example: 18 months = 1.5 years. Then use I = P × r × 1.5. This calculator does the conversion automatically.
Is simple interest better for borrowers?
Yes. Simple interest costs less because you only pay interest on the original balance, not on accumulated interest. As an investor, you want compound interest to maximize returns.
How much is daily interest on $10,000 at 6%?
Daily interest = ($10,000 × 0.06) ÷ 365 = $1.64 per day. Using the 360-day convention: $1.67 per day.
Can I use this for savings accounts?
This calculator works for any simple interest scenario — loans, CDs, bonds, or savings with simple interest. Most savings accounts use compound interest though, so use our Compound Interest Calculator for those.