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Simple interest calculator
Simple interest is interest worked out on the original amount only, never on interest that has already built up. Enter a principal, an annual interest rate and a length of time, and this tool returns the interest earned, the total value at the end, and the interest added each year. Because the calculation always uses the starting sum, simple interest grows by the same amount every year, a straight line rather than the accelerating curve of compound interest. It is the basis of many fixed loans, car finance, some bonds and short-term arrangements between people, and it is the cleanest way to understand what an interest rate means before compounding complicates the picture. Enter a rate as a yearly percentage and a time in years; for months, use a fraction such as 0.5 for six months. The tool keeps the maths in plain view so you can see exactly how the principal, the rate and the time combine.
Simple interest is charged only on the original principal, so the balance grows by the same amount every year. Most savings accounts and many loans use compound interest instead, which adds interest on the interest already earned and so grows faster over time; use the compound interest calculator for those.
How it works
- Enter the principal, the amount borrowed or invested at the start.
- Enter the annual interest rate as a percentage.
- Enter the time the money is held or borrowed, in years; use a decimal for part-years.
- The tool multiplies the principal by the rate and by the time to find the total interest.
- It adds that interest to the principal for the total value, and divides the interest by the years for the amount added each year.
interest = principal x (rate / 100) x time; total = principal + interest
Simple interest multiplies three things: the principal, the yearly rate as a decimal, and the number of years. Because the principal never changes in the calculation, each year adds the same slice of interest, so the total interest is just that yearly amount times the number of years. Adding it to the principal gives the final value. The formula rearranges easily, so any one of the principal, rate or time can be found from the other two and the interest.
- principal
- the starting amount, borrowed or invested
- rate
- the annual interest rate, as a percentage
- time
- the length of the loan or investment, in years
- interest
- the total charge or earning over the whole time
Interest on 1,000 at different rates and times
| 5% for 1 year | 50 interest | total 1,050 |
| 5% for 3 years | 150 interest | total 1,150, the worked example |
| 10% for 5 years | 500 interest | total 1,500 |
| 3% for 10 years | 300 interest | total 1,300 |
Worked example
You invest 1,000 at 5 percent simple interest for 3 years: each year adds 5 percent of the original 1,000, which is 50, so after three years the interest is 150 and the total value is 1,150. Unlike compound interest, the second and third years still earn interest on 1,000 only, not on the 1,050 or 1,100 you hold by then, which is why a compound account would have paid a little more.
Key facts
- Simple interest is charged on the original principal alone, so it grows in a straight line.
- For the same rate and a period longer than one year, compound interest always exceeds simple interest.
- The formula has four parts, so knowing any three lets you solve for the fourth.
- A part-year is handled by entering the time as a decimal, such as 0.5 for six months.
Tips
- Match the rate and the time to the same unit; an annual rate needs the time in years, with months entered as a fraction.
- For anything that compounds, such as most savings accounts, use the compound interest calculator instead, or you will understate the result.
- When comparing loans, look for the APR rather than a headline simple rate, since fees and compounding can make the true cost higher.
- To find a missing rate or term, rearrange the formula rather than guessing, because the three known numbers fix the fourth exactly.
Frequently asked questions
How is simple interest different from compound interest?+
Simple interest is always figured on the original principal, so it adds the same amount each year. Compound interest is figured on the principal plus the interest already earned, so it grows faster and faster. Over long periods the gap between the two becomes large.
When is simple interest used?+
It is common in fixed-term loans, car finance, some government and corporate bonds that pay a set coupon, and informal loans between individuals. Many short-term and fixed-instalment products quote a simple rate.
How do I handle months or days?+
Convert the time to a fraction of a year. Six months is 0.5, three months is 0.25, and ninety days is about 0.2466. Enter that fraction as the time and the interest scales down accordingly.
Is the rate here the same as APR?+
Not always. APR can fold in fees and compounding, while this is a plain simple rate on the principal. For a loan with charges or compounding, the APR will differ from the simple rate shown here.
Does simple interest ever beat compound interest?+
For the same rate and time, never, once more than one period passes; compound always pays or costs more. They are equal only over a single period or when the rate is zero. A higher simple rate can still beat a lower compound rate, though.
Can I work out the rate or time from the interest?+
Yes. Rearrange the formula: the rate is the interest divided by the principal times the time, and the time is the interest divided by the principal times the rate. The same three numbers can be solved for whichever one you are missing.
Things to watch
- This calculator does not compound, so it understates the return on a savings account or any product that adds interest to interest.
- A quoted simple rate can look cheaper than an APR that includes fees and compounding, so compare like for like before borrowing.
- Tax may be due on interest earned, which this figure does not deduct, so the amount you keep can be lower.
Last updated: 2026
This is an estimate for general guidance, not financial, tax, legal or medical advice. Figures can change and individual circumstances vary. Always confirm with the official sources listed before making decisions.
Reviewed by Vikas Dulgunde. Editorial standards.