What does Simple Interest Calculator do?
Free simple interest calculator (I = P × r × t) for years, months or days, with the working shown and a year by year comparison against compound interest.
- Price
- Free
- Account
- Not required
- Processing
- Entirely in your browser; your data and files are not uploaded
- Works on
- Any modern browser on desktop, tablet or phone
- Category
- Financial Calculators
How to use the simple interest calculator
- Enter the principal (the amount borrowed or deposited) and the annual interest rate.
- Enter the time and choose years, months or days. For days, choose a 365 or 360-day year.
- Read the interest, the total and the working.
- Compare with compound interest at your chosen compounding frequency in the chart and table.
Worked example
$10,000 at 5% for 3 years
Simple interest is $10,000 × 0.05 × 3 = $1,500, a total of $11,500, or $500 every year. Compounded monthly, the same deposit grows to $11,614.72, so compounding earns $114.72 more. Over 10 years the gap grows to $1,470.09 ($15,000 simple against $16,470.09 compound).
How it works
Simple interest I = P × r × t, where P is the principal, r the annual rate as a decimal and t the time in years (months ÷ 12, or days ÷ 365 or 360). Total = P + I. The compound comparison uses P × (1 + r ÷ m)m × t with m compounding periods a year.
Assumptions
- Interest is charged on the original principal only, with no repayments or withdrawals.
- The rate is a nominal annual rate that you enter.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is earned or charged only on the original principal, so it is the same every year. Compound interest is also charged on interest already added, so it grows faster over time. For one compounding period the two are equal.
Where is simple interest used?
Bond coupon payments, some short-term loans and many textbook problems use simple interest. Most savings accounts, credit cards and mortgages compound, so check your agreement.
Why does a 360-day year give more interest?
Dividing by 360 makes each day a slightly bigger share of a year, so the same number of days earns about 1.4% more interest than with 365. Some commercial loans and money market instruments use it.
Limitations
- Does not model repayments during the term; use the loan calculator for amortizing loans.
- Taxes and fees are not included.