Simple Interest Calculator
Calculate interest with I = P × r × t for any number of years, months or days, and see how it compares with compounding.
Simple interest
$1,500.00
- Total amount
- $11,500.00
- Time in years
- 3
- Compounded yearly instead
- $1,576.25
- Difference
- $76.25
Simple vs compound, by year
Simple interest formula
I = P · r · t A = P(1 + r·t)
Simple interest grows in a straight line: the same dollar amount each year, because it is only ever charged on the original principal. Compound interest charges interest on accumulated interest too, so it curves upward. For short periods the two are nearly identical; over decades they diverge sharply, which the compound interest calculator explores in depth.
Frequently asked questions
What is the simple interest formula?
I = P × r × t: interest equals principal times the annual rate (as a decimal) times the time in years. $10,000 at 5% for 3 years earns $1,500. The total amount is A = P(1 + rt).
How do I calculate simple interest for months or days?
Convert the time to years: divide months by 12, or days by 365 (some lenders use 360, called the banker’s rule). 90 days at 6% on $5,000 is 5,000 × 0.06 × 90/365 = $73.97.
Where is simple interest used?
Many auto loans, some personal loans, US Treasury bills and short-term notes use simple interest calculated on the outstanding principal. Savings accounts and credit cards compound instead.
Is simple interest better than compound interest?
For a borrower, simple interest costs less over time. For a saver, compound interest earns more. The gap grows with time and rate; see the comparison table.