Simple Interest Calculator
Simple interest and the total amount for any principal, rate and time in years, months or days, compared with compound interest.
Simple interest = principal × rate × time ÷ 100. 10,000 at 8% a year for 3 years earns 2,400, for a total of 12,400; compounded yearly it would earn 2,597.12.
The words on this page, explained simply
New to this? Here is what each term means, in plain English.
- Simple interest
- Interest on the original amount only: principal × rate × time.
- Principal
- The original amount lent, borrowed or deposited, before any interest.
- Compound interest
- Interest earned on earlier interest as well as on the original amount, so growth snowballs over time.
Simple interest is paid only on the original amount, the same every year. It is used for many short-term loans, some deposits and car loans quoted at a flat rate, and in school maths. Enter the time in years, months or days.
The simple interest formula
SI = P × R × T ÷ 100, with P the principal, R the yearly rate in percent and T the time in years. Months count as T = months ÷ 12; days as T = days ÷ 365. The total amount is P + SI.
Example: 25,000 at 6% for 18 months: 25,000 × 6 × 1.5 ÷ 100 = 2,250, total 27,250.
Simple versus compound interest
| 10,000 at 8% | Simple interest | Compound (yearly) |
|---|---|---|
| 1 years | $800.00 | $800.00 |
| 3 years | $2,400.00 | $2,597.12 |
| 5 years | $4,000.00 | $4,693.28 |
| 10 years | $8,000.00 | $11,589.25 |
| 20 years | $16,000.00 | $36,609.57 |
For one year they match; the gap widens each year because compound interest earns interest on its interest. A loan quoted at a flat (simple) rate therefore costs more than the same reducing-balance rate.
Key takeaways
- SI = P × R × T ÷ 100.
- Total = principal + interest.
- Months ÷ 12, days ÷ 365 for T.
- Compound interest overtakes simple interest after the first year.
Frequently asked questions
How do you calculate simple interest?
Multiply the principal by the yearly rate and the time in years, then divide by 100. 10,000 at 8% for 3 years: 10,000 × 8 × 3 ÷ 100 = 2,400.
How do you calculate simple interest for months?
Divide the months by 12 to get years. 20,000 at 9% for 8 months: 20,000 × 9 × (8/12) ÷ 100 = 1,200.
Which is better, simple or compound interest?
For savers, compound interest pays more; for borrowers, simple interest on the original amount costs less than the same rate compounded.