How to use the simple interest calculator
- Under Solve for, keep Interest to find the interest, or pick Rate, Time or Principal if that is the number you are missing.
- Enter the Principal ($), the Annual interest rate (%) and the Time, choosing Years, Months or Days. When solving for something else, enter the Interest earned or owed ($) instead of the missing value.
- For a term in days, set Days in a year to 365 or to 360 if your lender uses the banker's rule.
- Read the interest and the total, or the missing value, plus a one-line summary.
The simple interest formula
I = P × r × t and Total = P + I
P is the principal, r is the annual rate as a decimal (5% = 0.05) and t is the time in years. Months become years by dividing by 12 and days by dividing by 365, or by 360 under the banker's rule. Rearranging gives r = I ÷ (P × t), t = I ÷ (P × r) and P = I ÷ (r × t). This follows the method in OpenStax Contemporary Mathematics, section 6.3. Interest is charged on the original principal only, never on earlier interest.
Worked example
With the defaults, $10,000 at 5% for 3 years gives I = 10,000 × 0.05 × 3 = $1,500.00 of interest, $500.00 a year, and a total of $11,500.00. For a short loan of $5,000 at 8% for 90 days, the interest is 5,000 × 0.08 × 90 ÷ 365 = $98.63, or $100.00 on a 360-day year.
Where simple interest applies, and where it does not
Simple interest fits short personal loans, bond coupons (a fixed percentage of face value each year) and classroom problems. Savings accounts and credit cards compound instead, so use the compound interest calculator for balances that grow on their own interest, and the APY calculator to compare savings rates. A loan with fees is better judged by its APR, which the APR calculator works out. On a loan that you repay in installments, interest falls as the balance drops, so this calculator overstates the cost of an amortizing loan. Inputs must be zero or more, the principal can be up to $1 trillion and the rate up to 1,000%, and fees or missed payments are not modeled.
Simple interest questions
How do I calculate simple interest for months or days?
Convert the time to years first: divide months by 12 and days by 365, or by 360 if your lender uses a 360-day year. For example, 18 months is 1.5 years, and $5,000 at 8% for 90 days earns 5,000 × 0.08 × 90 ÷ 365 = $98.63.
What is the difference between simple and compound interest?
Simple interest is charged on the original principal only, while compound interest is also charged on interest already added. Over 10 years at 5%, $10,000 grows to $15,000.00 with simple interest and to $16,288.95 with interest compounded once a year.
Is the rate in I = Prt monthly or annual?
Annual, with time measured in years. If you are quoted a monthly rate, multiply it by 12 first: 1.5% a month is 18% a year.
How do I find the rate or time if I know the interest?
Rearrange the formula: rate = I ÷ (P × t) and time = I ÷ (P × r). If $10,000 earned $1,500 in 3 years, the rate is 1,500 ÷ 30,000 = 0.05, or 5% a year.
What is the banker's rule?
It is the practice of dividing the annual rate by 360 days instead of 365. Because each day's interest is larger, a loan counted in days costs about 1.4% more interest than it would on a 365-day year.
Sources: OpenStax, Contemporary Mathematics, 6.3 Simple Interest. Results are estimates; your loan or deposit agreement sets the exact terms.