Simple Interest Calculator

This simple interest calculator figures interest earned or owed on a fixed principal at a fixed annual rate, using the classic I = P × r × t formula. It works in both directions: pick what you want to find and enter the other three values, and the interest calculator returns the missing number and a full breakdown in one step.

1. Choose what to solve for. The four toggle buttons at the top let you figure simple interest, back-solve for the principal needed to hit a target, compute the required annual rate, or find how long it takes to earn a given interest amount.
2. Enter the principal in dollars. This is the starting balance for a deposit, the original loan amount, or the face value of a bond.
3. Enter the annual interest rate as a percent (for example, 5.25 for 5.25%). The calculator converts it to a decimal internally, so do not divide by 100 yourself.
4. Enter the time period and pick Years, Months, or Days from the dropdown. The calculator normalizes months as t ÷ 12 and days as t ÷ 365, so a 90-day CD and a 3-month note will give slightly different answers because of the unit conversion.
5. Read the result panel. It shows the amount you were solving for in large type, then a breakdown table with principal, interest, rate, time in years, and the final total (principal + interest).

Change any input and the numbers update instantly, so you can compare a 4% savings rate against 5.5%, or run a 2-year loan alongside a 5-year term, without reloading the page.

I = P × r × t

Where:
I = Interest amount
P = Principal
r = Annual interest rate (decimal)
t = Time in years

Total Amount = P + I = P(1 + rt)

Example: $10,000 at 5% for 3 years = $10,000 × 0.05 × 3 = $1,500 interest, $11,500 total.

Daily, Monthly, and Annual Calculations

The formula expects time in years, so sub-year periods need a conversion before plugging in. A simple interest calculator handles this automatically, but here is what is happening under the hood:

Annual:   I = P × r × 1           →  $10,000 × 0.05 × 1      = $500.00
Monthly:  I = P × r × (m ÷ 12)   →  $10,000 × 0.05 × (6÷12) = $250.00
Daily:    I = P × r × (d ÷ 365)  →  $10,000 × 0.05 × (90÷365) = $123.29

The daily version is the formula auto lenders and most personal loan servicers use to accrue interest between payments. A $10,000 auto loan at 6% accrues $10,000 × 0.06 ÷ 365 = $1.64 in interest per day. Miss a payment by 15 days and you owe $24.60 in extra interest, on top of any late fee.

Simple vs Compound: $10,000 at 5% Over Time

Simple interest grows in a straight line. Compound interest curves upward because each period earns interest on previously earned interest. Over short time frames the gap is small; over decades it is enormous.

On a 1-year horizon the two methods are identical. By year 10 compound is ahead by $1,289, and by year 30 it nearly doubles the simple-interest result. If you are comparing a savings account to a CD, or a bond coupon to a dividend-reinvestment plan, this is the gap you are really pricing.

Quick-Reference Table: Interest on $1,000 at Common Rates

For any principal, multiply the number below by your balance in thousands. $7,500 at 4% for 3 years is 7.5 × $120 = $900 in simple interest.

A simple interest calculator is useful only if the loan or deposit you are pricing actually uses simple interest. Many consumers assume every quoted rate is simple, but in practice simple interest is the minority product in US finance. Here is where it shows up, how to recognize it on paper, and when paying early does or does not help.

Real-World Products That Use Simple Interest

• Auto loans (most US states). The vast majority of new and used auto loans accrue interest daily on the outstanding principal, which is mathematically equivalent to simple interest within each payment period.
• Personal loans from banks and credit unions. Fixed-rate installment loans from reputable lenders almost always use simple interest with daily accrual.
• Federal student loans. Direct Subsidized, Unsubsidized, and PLUS loans all accrue interest on a simple-interest basis, calculated daily on the current principal.
• Short-term bonds and Treasury bills. T-bills pay a fixed amount at maturity with no compounding along the way; the yield calculation is pure simple interest.
• Car title loans and some payday loans. These are often quoted as simple-interest fees, but the APR is punishing (typical title loan is 25% per month, which is 300% annualized).
• IRS tax penalties and interest on unpaid taxes. The underpayment interest rate compounds daily in practice, but the stated rate and most state tax interest calculations are simple interest on the unpaid balance.

Simple vs Compound: The Cost Gap on a Real Balance

The same $15,000 at 7% looks very different depending on whether interest is simple, compounded monthly, or compounded daily. This matters most when comparing a CD (usually compounded daily or monthly) to a T-bill (simple).

Monthly vs daily compounding changes the answer by less than $65 on a 10-year deposit. Simple vs compound changes it by $4,749. When you shop deposits, the compounding frequency is a rounding error; whether the product compounds at all is the real decision.

How to Tell Which Type of Interest a Lender Is Using

You will not always see the words "simple" or "compound" in a loan document. Instead, look for these tells:

• APR vs APY. Loans are quoted in APR (simple). Deposit accounts are quoted in APY (compound). If a CD lists a 4.50% APY, the underlying simple rate is slightly lower because APY already bakes in the compounding.
• Amortization schedule included. If the lender gives you a monthly payment table that shows each payment split into principal and interest, the loan uses simple interest accrued daily on the remaining balance. This is standard for auto, personal, and student loans.
• Daily periodic rate on your statement. Credit cards and some lines of credit show a "daily periodic rate" and an "average daily balance" on the statement. That is daily compounding, not simple interest, even though each day's interest is calculated simply.
• Language about "add-on interest" or "pre-computed interest." This is a red flag. See the next section.

Pre-Computed Interest Loans: When Paying Early Saves Nothing

A small number of subprime auto lenders and some older finance-company loans use pre-computed interest, sometimes called the Rule of 78 or add-on interest. The total interest for the full term is calculated up front using the simple-interest formula, then baked into every payment. If you pay off the loan early, you still owe most of the original interest. A $10,000 pre-computed loan at 12% for 5 years has $6,000 in total interest locked in on day one; paying it off in year 2 might save only $900, not the $3,600 a normal simple-interest loan would save.

Before signing any installment loan, ask one direct question: "Is this a simple-interest loan or a pre-computed interest loan?" If the answer is anything other than "simple interest, accrued daily," walk away or read the prepayment clause line by line. Federal law now restricts pre-computed interest on loans longer than 61 months, but shorter terms remain legal in many states.

When a Simple-Interest Product Beats a Compound One

Most of the time you want compound on your deposits and simple on your loans. But there is a specific case where simple interest on a deposit is fine: short holding periods. If you are parking cash for 90 days before a home down payment, a 5.0% simple-interest T-bill and a 5.0% APY money market fund will pay almost the same dollar amount, and the T-bill is state-tax-free. At that horizon, compounding has not had time to matter.