Simple Interest Calculator

Use this simple interest calculator to show how much you’ll earn or owe when interest is calculated only on your original amount, never on accumulated interest.

What is a Simple Interest Calculator?

A simple interest calculator shows how much you’ll earn or owe when interest is calculated only on your original amount, never on accumulated interest. This is the straightforward way to calculate returns or costs—multiply your principal by the rate and time, and you’re done. No compounding, no complexity.

This matters because simple interest behaves differently from the compound interest most people encounter. With simple interest, you earn the same dollar amount each year. With compound interest, earnings accelerate over time. Knowing which type you’re dealing with changes how you evaluate loans, investments, and savings vehicles.

The calculator handles any timeframe, years, months, or days, and shows not just total interest but also monthly and daily breakdowns. A visual chart makes the linear growth pattern obvious, helping you compare against compound interest alternatives.

Input Fields Explained

Principal Amount – Your starting sum. For investments, this is what you deposit initially. For loans, it’s what you borrow. Simple interest is always calculated based on this original amount, never on accumulated interest.

Annual Interest Rate – The yearly percentage applied to your principal. A 5% rate on $10,000 means $500 in interest every year, period. Unlike compound interest, where the effective rate increases over time, simple interest delivers the same dollar amount annually.

Time Period – How long the money sits earning or accruing interest. Enter the number matching your chosen unit.

Time Unit – Whether your time period represents years, months, or days. This flexibility helps with short-term calculations. A 90-day note works just as easily as a 5-year loan.

How Simple Interest Calculator Math Works

The calculation couldn’t be simpler:

Interest = Principal × Rate × Time

Or written as the classic formula:

I = P × r × t

Where:

• I is total interest earned or owed
• P is your original principal
• r is the annual rate as a decimal (5% becomes 0.05)
• t is time in years

Converting Time Units

When using months, we divide by 12 to convert to years:

• 18 months = 18 ÷ 12 = 1.5 years

When using days, we divide by 365:

• 90 days = 90 ÷ 365 = 0.247 years

Finding Total Amount

Add interest to principal for your final balance:

Total Amount = Principal + Interest

Breaking Down to Smaller Periods

Monthly interest = Total Interest ÷ Number of Months. Daily interest = Total Interest ÷ Number of Days

These show your average daily or monthly earnings, useful for budgeting or comparing investment options.

What Your Results Show

Total Interest – Every dollar earned or owed over the full time period. This stays constant per year—$500 annually on a $10,000 principal at 5%, whether it’s year one or year five.

Total Amount – Principal plus all interest. This is what you’ll have at the end for investments, or what you’ll owe for loans.

Monthly Interest – Average interest per month. Divide the total interest by the number of months in your timeframe. Helps with monthly budgeting and cash flow planning.

Daily Interest – Average interest per day. Useful for very short-term notes or when comparing different day-count conventions.

Growth Chart – Stacked bars showing principal (gray) and accumulating interest (blue) over time. The interest portion grows in equal steps each period, creating a distinctive stair-step pattern. This linear growth contrasts sharply with the exponential curve of compound interest.

Where Simple Interest Gets Used

Car Loans – Many auto loans use simple interest, calculating interest on the outstanding balance daily. Pay early in the month to save on interest compared to paying late.

Short-Term Notes – Promissory notes under one year frequently use simple interest. A 6-month note at 8% on $20,000 earns exactly $800.

Legal Judgments – Courts often award simple interest on monetary damages. If you’re owed $50,000 and the judgment includes 6% annual interest for 2 years, that’s an additional $6,000.

Certain Bonds – Some bond types, particularly zero-coupon bonds held to maturity, effectively use simple interest calculations for tax purposes.

Simple vs. Compound: The Critical Difference

With $10,000 at 5% for 5 years:

Simple Interest:

• Year 1: $500
• Year 2: $500
• Year 3: $500
• Year 4: $500
• Year 5: $500
• Total: $2,500

Compound Interest:

• Year 1: $500.00
• Year 2: $525.00
• Year 3: $551.25
• Year 4: $578.81
• Year 5: $607.75
• Total: $2,762.81

That $262.81 difference comes from interest earned. Over longer periods or higher rates, this gap explodes.

Conclusion

Before accepting any loan, confirm whether it uses simple or compound interest. Simple interest loans cost less over time, all else being equal.

When investing, understand that simple interest vehicles like certain bonds won’t grow as fast as compound interest options like reinvested dividends or interest-bearing savings accounts.

Use this simple calculator to verify calculations on short-term notes or legal settlements. The math is straightforward enough that discrepancies usually indicate errors.

For quick estimates, simple interest gives you a baseline. If someone quotes you 7% returns on $15,000 over 3 years, you know the absolute minimum is $3,150 in interest (simple). Anything claiming less is suspicious. Anything more likely involves compounding.

This calculator strips away complexity. No fancy formulas, no exponential growth—just your principal multiplied by rate and time. That simplicity makes it perfect for teaching interest concepts, verifying basic calculations, and evaluating short-term financial instruments where compounding doesn’t factor in.