Simple Interest Calculator
Solve I = P·r·t for interest, principal, rate, or time, see the final balance, and compare simple against compound interest year by year.
Simple vs compound on the same money
A principal of 1 000 at 5% a year, side by side. Both columns come from the same functions this calculator uses. Note year 1: with annual compounding the two are identical, because compounding has not had a period to act on yet. Every year after that the gap widens, and it widens faster each time.
| Year | Simple | Compound (annual) | Difference |
|---|---|---|---|
| 1 | 1 050.00 | 1 050.00 | — |
| 2 | 1 100.00 | 1 102.50 | +2.50 |
| 3 | 1 150.00 | 1 157.63 | +7.63 |
| 4 | 1 200.00 | 1 215.51 | +15.51 |
| 5 | 1 250.00 | 1 276.28 | +26.28 |
| 6 | 1 300.00 | 1 340.10 | +40.10 |
| 7 | 1 350.00 | 1 407.10 | +57.10 |
| 8 | 1 400.00 | 1 477.46 | +77.46 |
| 9 | 1 450.00 | 1 551.33 | +101.33 |
| 10 | 1 500.00 | 1 628.89 | +128.89 |
| 11 | 1 550.00 | 1 710.34 | +160.34 |
| 12 | 1 600.00 | 1 795.86 | +195.86 |
| 13 | 1 650.00 | 1 885.65 | +235.65 |
| 14 | 1 700.00 | 1 979.93 | +279.93 |
| 15 | 1 750.00 | 2 078.93 | +328.93 |
| 16 | 1 800.00 | 2 182.87 | +382.87 |
| 17 | 1 850.00 | 2 292.02 | +442.02 |
| 18 | 1 900.00 | 2 406.62 | +506.62 |
| 19 | 1 950.00 | 2 526.95 | +576.95 |
| 20 | 2 000.00 | 2 653.30 | +653.30 |
| 21 | 2 050.00 | 2 785.96 | +735.96 |
| 22 | 2 100.00 | 2 925.26 | +825.26 |
| 23 | 2 150.00 | 3 071.52 | +921.52 |
| 24 | 2 200.00 | 3 225.10 | +1 025.10 |
| 25 | 2 250.00 | 3 386.35 | +1 136.35 |
| 26 | 2 300.00 | 3 555.67 | +1 255.67 |
| 27 | 2 350.00 | 3 733.46 | +1 383.46 |
| 28 | 2 400.00 | 3 920.13 | +1 520.13 |
| 29 | 2 450.00 | 4 116.14 | +1 666.14 |
| 30 | 2 500.00 | 4 321.94 | +1 821.94 |
Currency omitted deliberately — the ratios are what matter, and they are the same whatever the currency.
What simple interest is
I = P · r · t · A = P · (1 + r · t)
P is the principal, r the annual interest rate as a decimal, and t the time in years.I is the interest and A the final balance. The defining feature is that interest is always calculated on the original principal. Interest already accrued never earns interest of its own, so the balance grows in a straight line rather than a curve.
Because the formula has four quantities and one equation, knowing any three gives you the fourth. Rearranged: P = I / (r · t), r = I / (P · t), and t = I / (P · r). This calculator does all four directions — pick one in "solve for" and that field dims, because it is now the answer rather than an input.
Worked example
Borrow 10 000 at 5% simple interest for 3 years. The interest is 10 000 × 0.05 × 3 = 1 500, and you repay 11 500. Each year adds exactly 500, never 501 — that is the whole difference from compounding. Halve the term and you halve the interest to 750; double the rate and it doubles to 3 000. Simple interest is proportional to all three inputs, which is why lenders quoting it can state the total cost of a loan up front.
Where you actually meet it
Simple interest is not a teaching abstraction. Most car loans and other instalment credit accrue simple interest on the outstanding balance. Bond coupons are simple interest on the face value — a 4% coupon pays 4% of par each year and does not reinvest itself. Short-term promissory notes, bridging finance, treasury bills and the interest a court awards on a judgment are all conventionally simple. So is the accrued interest calculation on most consumer credit between statement dates.
How it differs from compound interest
Compound interest pays interest on interest, so the balance follows A = P · (1 + r/m)^(m·t) and curves upward. The two models agree exactly at one year with annual compounding, and diverge in both directions from there: compound is higher beyond a year and slightly lower inside it, because within the first period simple interest accrues on the full principal from day one while the compound curve is still catching up. The table above shows the long-run divergence — over 30 years at 5% the compound balance is more than 70% larger. When you are borrowing, simple is cheaper; when you are saving,compound interest is what you want.
Where this model stops being valid
This assumes one lump sum, a fixed rate, no repayments and no fees. An instalment loan where you pay monthly is not this calculation, because the balance the interest accrues on falls with every payment — use theloan calculator for that. Nothing here accounts for tax on interest, inflation eroding the real return, or day-count conventions: real contracts specify 30/360, actual/365 or actual/actual, and those disagree by a few days' interest over a year. For a rate quoted as APR on a revolving balance, the effective cost is compounding even when the headline number is described as simple.