Simple Interest Calculator
FinanceChoose what you want to find: the interest, the principal, the rate or the time. Enter the other values and pick whether the time is in years, months or days. Days can be counted on a 360-day or a 365-day year.
Step by step
I = 10,000 × 3 / 100 × t = $300.00
- Time t in years: months are divided by 12, days by 360 or 365. You entered 1, unit “Years”.
- Interest: I = 10,000 × 3 / 100 × t = $300.00.
- Principal plus interest: $10,000.00 + $300.00 = $10,300.00.
Once every entry is valid, you’ll see each step of the calculation here.
Formula
- I
- interest in dollars
- P
- principal
- r
- annual interest rate in percent
- t
- time in years (months / 12, days / 360 or days / 365)
How it works
Simple interest is paid only on the original principal, never on interest already earned. The formula is I = P × r × t: principal times the annual rate as a decimal times the time in years. $10,000 at 4% for 3 years earns 10,000 × 0.04 × 3 = $1,200, so you end with $11,200. With compound interest the same money would earn interest on its interest as well and end slightly higher.
The time must be in years, so months are divided by 12 and days by the number of days in the year. Many US loans count interest on the actual days over a 365-day year (actual/365); others, including many commercial loans, use a 360-day year (actual/360 or 30/360), which makes each day’s interest slightly larger. 90 days at 6% on $20,000 cost $300 on a 360-day year and $295.89 on a 365-day year.
Rearranging the formula answers the other questions: the principal you need for a target amount of interest, the rate a deal really pays, or how long it takes to earn a given amount. Simple interest is used for many car loans, short-term loans, Treasury bills and some personal loans. For savings where interest compounds, use the compound interest calculator; for monthly loan payments, the loan calculator.
The formula
Dividing the rate by 100 turns a percentage into a decimal: 4% becomes 0.04. The four formulas are the same equation solved for a different unknown.
Monthly interest on a simple interest balance is the annual interest divided by 12: $10,000 at 6% earns $50 a month. Daily interest is the annual interest divided by 365 (or 360): about $1.64 a day on a 365-day year.
Example
How much simple interest does $10,000.00 earn at 4% in 3 years?
- Rate as a decimal: 4 / 100 = 0.04. Time: 3 years.
- Interest: 10,000 × 0.04 × 3 = $1,200.00.
- Total after 3 years: $11,200.00.
$10,000.00 at 4% earns $1,200.00 in simple interest, for a total of $11,200.00.
Load this example into the calculatorFrequently asked questions
What is the simple interest formula?
I = P × r × t, with P the principal, r the annual rate as a decimal and t the time in years. $2,500 at 3% for 18 months: 2,500 × 0.03 × 1.5 = $112.50 of interest.
What is the difference between simple and compound interest?
Simple interest is figured on the original principal only. Compound interest is figured on the principal plus the interest already added. $10,000 at 5% for 10 years earns $5,000 simple interest but $6,288.95 compounded yearly.
How do I calculate monthly interest?
Divide the annual rate by 12 and multiply by the balance. At 6% a year, the monthly rate is 0.5%, so $8,000 earns or costs $40 a month in simple interest. For several months, multiply by the number of months.
Why do some lenders use a 360-day year?
It is an old banking convention that makes day counts easier. With actual/360, each day carries 1/360 of the annual rate, so a full year of 365 days costs a little more than the stated rate: about 5.07% on a 5% loan.
How do I find the interest rate from the interest paid?
Divide the interest by the principal and by the time in years, then multiply by 100. $450 of interest on $6,000 over 2 years is 450 / (6,000 × 2) × 100 = 3.75% a year. Choose “Rate” above to do this with your numbers.
- Interest (Wikipedia)
- Day count convention (Wikipedia)
- Compound interest (glossary) (Investor.gov, U.S. Securities and Exchange Commission)