Simple Interest Calculator
Calculate simple interest and the total amount for a loan or investment based on the principal, annual rate, and time period.
The initial amount of money.
Annual interest rate (e.g. 5 for 5%).
Enter as decimal for partial years.
Simple Interest = P × R × T / 100
Frequently Asked Questions
What is simple interest?
Simple interest is interest calculated only on the original principal amount — not on any accumulated interest. It is commonly used for short-term loans, auto loans, and some mortgages. The formula is: Interest = Principal × Rate × Time.
Where is simple interest commonly used?
Simple interest is used for many consumer loans including auto loans, personal loans, and some mortgages in the US. It is also used for Treasury bills (T-bills) and short-term commercial loans. Credit card interest, by contrast, is typically calculated using compound interest.
How do I tell if my loan uses simple or compound interest?
Most loan documents and statements will specify the interest method. Simple interest loans accrue interest evenly across each period. Compound interest loans charge interest on previously accumulated interest, which grows faster over time. If you're unsure, ask your lender.
Does paying early reduce the total interest?
Yes. On a simple interest loan, interest accrues daily. Paying early — before the due date — reduces the principal balance sooner, which means less interest accrues for the remaining period. Making an extra principal payment each year has the same effect.