CALCSLIP

Simple interest calculator

Interest on a principal that does not compound: I = P × r × t.

$
%
Term in

Result

Interest
$600.00
Principal
$5,000.00
Principal + interest
$5,600.00
Term in years
3
Interest per month
$16.67

How this was calculated

  1. Term in years

    t = years

    t = 3

  2. Interest

    I = P × r × t

    $5,000.00 × 0.04 × 3 = $600.00

  3. Total

    A = P + I

    $5,000.00 + $600.00 = $5,600.00

What this calculation assumes

  • Interest is charged only on the original principal. It is never added to the balance to earn more interest (that is compound interest).
  • The rate is a yearly rate. Terms in days use the day count you choose: 365 days a year, or 360 as many banks do.

Estimates for information only. They are not financial advice, a loan offer or a guarantee of any return, rate or approval. Lenders and providers calculate with their own terms; check yours before you decide.

The formula

I = P × r × t

Simple interest is charged only on the original principal P, at the annual rate r, for t years. It never earns interest on itself. Example: $5,000 at 4% for 3 years earns $5,000 × 0.04 × 3 = $600, for a total of $5,600.

For terms in days, t is the number of days divided by 365, or by 360 under the banker's convention some loans and bonds use. The 360-day year produces slightly more interest for the same rate.

Where it is used

Simple interest appears in short-term loans, some car loans, treasury bills and certificates that pay interest out rather than reinvesting it. Savings accounts and most investments compound; for those use the compound interest calculator.

Questions people ask

Is simple interest better for borrowers?

For the same rate and term, simple interest costs less than compound interest because interest is never charged on interest.

How do I find the rate from the interest?

Rearrange the formula: r = I ÷ (P × t). For $600 of interest on $5,000 over 3 years, r = 600 ÷ 15,000 = 4%.