Simple Interest Calculator: I = P × r × t With Examples
Work out simple interest on a deposit or loan for any number of years, months or days, and see how it compares with compound interest at the same rate
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Simple Interest Calculator: I = P × r × t With Examples
Printed 2026-10-27 from billorganizingapp.com/income/calculators/simple-interest/ — an estimate for planning, not financial or tax advice.
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Enter the principal (the amount deposited or borrowed), the annual interest rate and the time in years, months or days. The calculator applies I = P × r × t and shows the interest, the total, the interest per year, month and day, and what the same rate would earn if it compounded once a year.
The simple interest formula
Interest = principal × annual rate × time in years. $10,000 at 5% for 3 years is $10,000 × 0.05 × 3 = $1,500, for a total of $11,500. For months divide by 12; for days divide by 365 (some lenders use 360, which gives slightly more interest). $10,000 at 5% for 90 days is $10,000 × 0.05 × 90 ÷ 365 = $123.29. Rearranged, the same formula finds any missing value: rate = I ÷ (P × t), principal = I ÷ (r × t) and time = I ÷ (P × r).
Simple vs compound interest
Simple interest is paid only on the original principal. Compound interest is also paid on interest already earned, so it pulls ahead the longer the money is left. The table uses $10,000 at 5%, with the compound column compounding once a year.
| Time | Simple interest | Compound interest | Difference |
|---|---|---|---|
| 1 year | $500 | $500 | $0 |
| 2 years | $1,000 | $1,025 | $25 |
| 3 years | $1,500 | $1,576.25 | $76.25 |
| 5 years | $2,500 | $2,762.82 | $262.82 |
| 10 years | $5,000 | $6,288.95 | $1,288.95 |
How this simple interest calculator works, in plain language
Simple interest is a fixed slice of the original amount for each year it is borrowed or saved. The calculator turns your rate into a decimal (5% becomes 0.05), turns the time into years (18 months is 1.5 years, 90 days is 90 ÷ 365), and multiplies the three together. Because interest is never added back to the principal, the interest for year two is exactly the same as for year one. The compound column shows what the same rate would earn if the interest were added to the balance once a year, so you can see how much compounding would change the answer.
Simple interest examples
Six common situations, computed with the same formula as the calculator (days are counted on a 365-day year). The last column is the same principal, rate and time with interest compounded once a year, for comparison. For periods shorter than a year, yearly compounding pays slightly less than simple interest (the fractional year is compounded, not multiplied), which is why it is lower in the 30- and 90-day rows.
| Scenario | Time | Simple interest | Total (P + I) | Interest per day | If compounded yearly |
|---|---|---|---|---|---|
| Savings example: $10,000 at 5% for 3 years | 3 years | $1,500 | $11,500 | $1.37 | $1,576.25 |
| Personal loan balance: $2,500 at 8% for 18 months | 18 months | $300 | $2,800 | $0.55 | $305.92 |
| One month on a car loan: $20,000 at 7% for 30 days | 30 days | $115.07 | $20,115.07 | $3.84 | $111.53 |
| Short-term note: $50,000 at 4.5% for 90 days | 90 days | $554.79 | $50,554.79 | $6.16 | $545.63 |
| Bond coupon: $10,000 face value at 4.25% for 5 years | 5 years | $2,125 | $12,125 | $1.16 | $2,313.47 |
| Family loan: $1,000 at 12% for 1 year | 1 year | $120 | $1,120 | $0.33 | $120 |
Common simple interest mistakes
The slips that most often give a wrong simple interest answer.
- Using the percentage instead of the decimal. 5% is 0.05 in the formula; using 5 makes the answer 100 times too big.
- Mixing months and years. The rate is per year, so 18 months must go in as 1.5 years. $2,500 at 8% for 18 months is $300, not 18 × 8% of $2,500.
- Ignoring the day-count basis. Some lenders divide by 360 instead of 365. A month of interest on a $20,000 balance at 7% is $115.07 on a 365-day year but $116.67 on a 360-day year.
- Treating a loan payment as all principal. On a simple-interest car or personal loan, each payment first covers the interest that has built up since the last one; only the rest reduces the balance. Paying late means more of the payment goes to interest.
- Using simple interest for a savings account. Savings accounts and CDs usually compound; compare them by the APY the bank quotes, or use the compound interest calculator.
Where simple interest is used
Many auto loans and personal loans charge simple interest on the balance outstanding each day, so paying early or extra cuts the interest. Bond coupons pay a fixed percentage of face value, which is simple interest on that face value. Savings accounts and CDs usually compound, which is why banks quote an APY under Regulation DD. For money left to grow, use the compound interest calculator.
Official sources
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.
Frequently Asked Questions
What is the formula for simple interest?+
I = P × r × t: principal × annual rate (as a decimal) × time in years. $10,000 at 5% for 3 years is $1,500.
How do you calculate simple interest for days?+
Divide the days by 365 to get years: $10,000 at 5% for 90 days = 10,000 × 0.05 × 90 ÷ 365 = $123.29. Some lenders divide by 360, which raises the interest slightly.
How do you find the rate in a simple interest problem?+
Rate = interest ÷ (principal × years). $1,500 of interest on $10,000 over 3 years is 1,500 ÷ 30,000 = 0.05, or 5% a year.
Is simple interest better than compound interest?+
When you borrow, simple interest costs less than compound interest at the same rate. When you save, compound interest earns more because interest earns interest.
How much is simple interest per month?+
Principal × annual rate ÷ 12. $10,000 at 5% is $41.67 a month.
How does simple interest work on a car loan?+
Interest builds each day on the balance you still owe: balance × annual rate ÷ 365 per day. On $20,000 at 7%, 30 days of interest is about $115.07. Each payment covers that interest first, and the rest lowers the balance, so the interest falls as the loan is paid down.
What is the formula A = P(1 + rt)?+
It gives the total amount (principal plus simple interest) after t years: A = P + P × r × t. $10,000 at 5% for 3 years is 10,000 × (1 + 0.05 × 3) = $11,500.
How do you find the time in a simple interest problem?+
Time in years = interest ÷ (principal × rate). $600 of interest on $5,000 at 4% took 600 ÷ 200 = 3 years.
How do I calculate simple interest in Excel or Google Sheets?+
Put the principal in A1, the annual rate as a percentage in B1 and the years in C1, then use =A1*B1*C1. For days, use =A1*B1*C1/365 with the number of days in C1.
Do banks use 360 or 365 days for simple interest?+
Both are used. Some commercial and short-term loans divide the annual rate by 360, which charges slightly more interest; consumer loan disclosures state the method. This calculator uses 365.
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