Simple Interest Calculator
Calculate interest when nothing compounds, and compare it with compounding.
Result
Interest: $1,320.00
Almost no consumer account works this way. Most savings and nearly all borrowing compound, which the comparison figure shows.
- Total amount
- $9,320.00
- Interest per month
- $36.67
- The same money compounded monthly
- $1,431.59Estimate
- Shown for comparison. Simple interest never reaches this figure.
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Results are arithmetic estimates based on the values you enter. Rates, fees and terms are set by your lender or provider, and your actual agreement controls what you pay or receive. Confirm important figures with them or with a qualified adviser. Read the full disclaimer
How to use the Simple Interest Calculator
- Enter the principal, which is the amount lent, borrowed or deposited.
- Enter the annual rate and the length of time, in years, months or days.
- Compare the interest with the compounded figure shown beside it.
The simplest interest there is
Simple interest is charged on the original principal and nothing else. It never earns interest on interest, so it grows in a straight line rather than a curve.
I = P × r × tP = principal r = annual rate t = time in yearsThree years at 5.5% on 8,000 produces exactly three equal years of 440, totalling 1,320. That predictability is why it still appears in fixed-term agreements and in loans between individuals.
Time has to be in years
The rate is annual, so the time must be too. Months are divided by twelve and days by 365 before the multiplication. A different day-count convention, such as the 360-day year used in some money markets, changes the answer on short periods, so check what the agreement actually specifies before relying on a figure for a matter of days.
Simple against compound
The comparison figure shows what the same principal at the same rate would produce compounding monthly. It is always larger, and the gap widens with both the rate and the time.
Over three years at 5.5% the difference is modest. Over thirty years at the same rate, compounding produces several times the simple result. This is the single most useful thing to understand about the two: for money you are lending or saving, compounding is better; for money you owe, it is worse.
Not the same as a loan’s total interest
An amortising loan is not simple interest on the original amount. Its balance falls with every payment, so interest is charged on a shrinking figure. A 32,000 car loan at 6% over three years costs about 3,046 in interest, while simple interest on the full 32,000 for three years would be 5,760.
Using simple interest to estimate a loan will always overstate the cost. The loan payment calculator runs the real schedule.
With your numbers
- I = P × r × t = $8,000.00 × 5.5% × 3 years
- Interest = $1,320.00
- Total = $8,000.00 + $1,320.00 = $9,320.00
Quick reference
Almost no consumer account works this way. Most savings and nearly all borrowing compound, which the comparison figure shows.
| Example | Interest |
|---|---|
| USD 8,000 at 5.5% for 3 years | $1,320.00 |
| USD 1,000 at 6% for 6 months | $30.00 |
| USD 5,000 at 4% for 90 days | $49.32 |
| USD 20,000 at 7.5% for 5 years | $7,500.00 |
| USD 500 at 12% for 30 days | $4.93 |
| EUR 12,000 at 3.25% for 2 years | €780.00 |
| EUR 3,000 at 4.75% for 18 months | €213.75 |
| EUR 50,000 at 2.9% for 10 years | €14,500.00 |
Common questions about the Simple Interest Calculator
- Where does simple interest actually apply?
- Some fixed-term personal and car loans, certain bonds paying periodic coupons, short-term commercial paper, and many informal loans between people. Most savings accounts and all revolving credit compound instead.
- Which day-count basis does this use?
- A 365-day year. Financial instruments use several conventions, including 360-day years, and a different basis changes the interest on short periods. For anything contractual, check which basis the agreement specifies.
- Why show the compounded figure too?
- Because the gap is the whole point. Simple interest always produces less than the same rate compounding, and seeing both makes it obvious which one an agreement is using.
- Can I use this to check a loan payment?
- No. An amortising loan charges interest on a falling balance, so its total interest is far below the simple interest on the original amount. Use the loan payment calculator for that.