Enter principal, rate, and time to find the interest earned and total amount owed or received.
Enter a principal amount, annual interest rate, and time period to find the interest earned and final total. Simple interest does not compound, so each period earns the same amount. Useful for short-term loans, bonds, and any situation where interest on interest is not a factor.
Simple interest is calculated by multiplying the principal by the rate and the time. Unlike compound interest, you only ever earn interest on the original amount. Banks use simple interest on some short-term loans and bonds.
You came here because
Common situations
- Short-term loans: Many personal and payday loans use simple interest, making it easy to calculate the total cost.
- Treasury bills: U.S. T-bills use simple interest. Calculate how much you earn on a 6-month or 1-year bill.
- Car loans: Some auto loans use simple interest calculated on the daily balance.
- Bank deposits: Some fixed deposits and certificates of deposit pay simple interest at maturity.
Under the hood
How the calculation works
- 1Enter the principal: the starting amount.
- 2Enter the annual interest rate as a percentage.
- 3Enter the time period in years. Use decimals for partial years (e.g., 0.5 for 6 months).
- 4The calculator multiplies P × r × t to get total interest.
- 5Total amount is the principal plus the interest.
Show me
A real example
Example: $3,000 at 4.5% for 2 years
- 1P = $3,000, r = 4.5% = 0.045, t = 2
- 2I = 3000 × 0.045 × 2
- 3I = $270
- 4Total = $3,000 + $270 = $3,270
Watch out for
What can go wrong
- Confusing simple with compound interest: Simple interest does not earn interest on previous interest. Compound interest does. Most savings accounts and mortgages compound. Use the compound interest calculator for those.
- Using the wrong time unit: The formula uses time in years. If your loan runs for 18 months, enter 1.5, not 18. Entering months instead of years inflates the interest by 12x.
- Applying simple interest to an amortizing loan: Personal loans and mortgages use amortization, not simple interest. For those, use the loan or mortgage calculator. Simple interest applies to short-term bonds, certificates of deposit, and some personal agreements.
- Treating the interest amount as periodic: Simple interest gives the total for the whole period, not per month. Divide by the number of months if you need the monthly interest charge.
Glossary
Related concepts
| Term | Definition |
|---|---|
| Principal | The original sum of money on which interest is calculated. |
| Simple vs compound interest | Simple interest is only calculated on the principal. Compound interest earns interest on accumulated interest too, growing faster over time. |
| Flat rate | Another name for simple interest when applied to loans. The interest is the same each year because it is always based on the original amount. |
| Maturity value | The total amount you receive at the end of the investment period: principal plus interest. |
Make it better
Pro tips
- Use it to estimate bond interest: Treasury bills, certificates of deposit, and short-term bonds often use simple interest. Enter the face value, stated rate, and holding period to check the payout.
- Compare with compound interest for short terms: For periods under one year, the difference between simple and compound interest is small. Run both and compare; if the difference is minor, use the simpler calculation for quick estimates.
- Calculate the implied rate from a loan offer: If a lender quotes the interest amount directly (not the rate), rearrange the formula: rate = interest ÷ (principal × time). This reveals the actual annual rate.
- Use the total amount field for savings targets: If you know how much you want at the end of a term, enter that as the target and work backward to find the starting principal or required rate.
Common questions
Frequently asked questions
For related calculations, try the Compound Interest, Loan Calculator, or ROI Calculator. Browse all Calculator Online calculators for the full catalog.
Methodology
This calculator uses the standard simple interest calculator formula. Results match those from established financial, scientific, and health references.
Reviewed by
Calculator Online Editorial Team. All formulas verified against authoritative sources before publication.
Last updated
2026-01-15