Simple Interest Calculator
Interest = P × R × T
How Simple Interest Works
Simple interest is the most straightforward form of interest calculation: you earn or owe a fixed percentage of the original principal for each time period, with no interest-on-interest effect. The formula is I = P × R × T, where I is interest, P is principal, R is the annual rate (as a decimal), and T is time in years. Total amount = P + I.
For example, $1,000 invested at 5% simple interest for 3 years earns I = 1000 × 0.05 × 3 = $150 in interest, for a total of $1,150. Each year contributes exactly $50 in interest regardless of how much has accumulated — the interest base never changes. Compare this to compound interest on the same terms, which would yield $157.63.
Simple interest appears in short-term loans, some personal loans, car notes, and certain bonds. It is also how many students first learn about interest in math class. Because it does not compound, simple interest grows linearly: double the time, double the interest. Double the rate, double the interest. This predictability makes it easy to calculate by hand.
When evaluating financial products, knowing whether interest is simple or compound is critical. A credit card uses compound interest (and daily compounding at that), which is why balances can spiral quickly. A simple-interest personal loan of $5,000 at 8% for 2 years costs exactly $800 in interest — no surprises if you pay on schedule.
Use this calculator for homework, loan estimates, bond calculations, or any scenario where interest applies only to the original principal. Enter the principal, annual rate, and time period to get the interest earned and total amount — clear, linear math with no compounding complexity.
Examples
| Example | Result |
|---|---|
| $1,000 at 5% for 3 years | Interest $150, total $1,150 |
| $5,000 at 4% for 2 years | Interest $400, total $5,400 |
| $2,000 at 6% for 5 years | Interest $600, total $2,600 |
| $10,000 at 3% for 10 years | Interest $3,000, total $13,000 |
| $500 at 8% for 1 year | Interest $40, total $540 |
| $7,500 at 5.5% for 4 years | Interest $1,650, total $9,150 |
| $3,000 at 7% for 6 months | Interest $105, total $3,105 |
Frequently asked questions
I = P × R × T, where P is principal, R is the annual rate as a decimal, and T is time in years. Total = P + I.
Simple interest applies only to the original principal each period. Compound interest applies to principal plus accumulated interest, growing faster over time.
Common in short-term personal loans, some auto loans, treasury bills, and basic financial math. Most long-term investments use compound interest.