How to use the simple interest calculator
- Choose what you want to solve for — usually interest.
- Enter the other values: principal, annual rate and time (in years, months or days).
- Read the result with the formula and working shown, plus the total amount and a comparison with compound interest.
The simple interest formula
I = P × R × T
where P is the principal (amount borrowed or invested), R the annual interest rate as a decimal, and T the time in years. The total amount is A = P + I = P(1 + RT).
Example: 50,000 at 8% per year for 3 years → I = 50,000 × 0.08 × 3 = 12,000. Total = 62,000.
Rearranged formulas
P = I ÷ (R × T) R = I ÷ (P × T) T = I ÷ (P × R)
Time in months or days
Convert time to years: 18 months = 18 ÷ 12 = 1.5 years; 90 days = 90 ÷ 365 years. (Some banks use a 360-day year for certain products, which slightly increases the interest.)
Simple vs. compound interest
With simple interest, you earn interest only on the original principal. With compound interest, interest is added to the balance and itself earns interest. Over short periods the difference is small; over long periods it becomes large. 50,000 at 8% for 20 years earns 80,000 simple interest but about 183,000 compound interest (compounded yearly). See our Compound Interest Calculator.
Where simple interest is used
- Many short-term personal loans and some car loans.
- Certain fixed deposits and savings certificates that pay interest out rather than reinvesting it.
- Late-payment interest and some trade credit.
- School and university maths exams — it is a standard topic in most curricula.
Frequently asked questions
What is the simple interest formula?
I = P × R × T, where P is the principal, R the annual rate (as a decimal) and T the time in years.
How do I calculate simple interest for months?
Divide the number of months by 12 to get years. For 6 months at 10% on 10,000: 10,000 × 0.10 × 0.5 = 500.
Is simple interest better than compound interest?
For borrowers, simple interest is cheaper. For savers, compound interest earns more.
How do I find the rate from the interest?
Choose “Rate” in Solve for. R = I ÷ (P × T), then multiply by 100 for a percentage.