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Simple Interest Calculator

Use this calculator to find the Principal, Interest Rate, Time (Term), or Ending Balance using the simple interest formula I = Prt.

Balance
Principal
Term
Rate
Principal (P)
$
Interest Rate (r) %
Time / Term (t)
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End Balance:
Total Interest:
Calculation steps:

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Balance Accumulation Graph
Principal
Interest
$0
Term
Final Breakdown
Principal
Interest
Accumulation Schedule
Period Accumulated Interest Total Balance

What is Simple Interest?

Interest is the cost you pay to borrow money or the compensation you receive for lending money. You might pay interest on an auto loan or credit card, or receive interest on cash deposits in interest-bearing accounts, like savings accounts or certificates of deposit (CDs).

Simple interest is interest that is only calculated on the initial sum (the "principal") borrowed or deposited. Generally, simple interest is set as a fixed percentage for the duration of a loan. No matter how often simple interest is calculated, it only applies to this original principal amount. In other words, future interest payments won't be affected by previously accrued interest.

Simple Interest Formula

The basic simple interest formula looks like this:

I = P × r × t

Where:
I = Total simple interest
P = Principal amount or the original balance
r = Interest rate per period (expressed as a decimal)
t = Number of time periods

Under this formula, you can manipulate "t" to calculate interest according to the actual period. For instance, if the rate is an annual rate but you wanted to calculate interest over six months, your "t" value would equal 0.5.

Simple Interest Example

Let's say you take out a $10,000 loan at 5% annual simple interest to repay over five years. You want to know your total interest payment for the entire loan.

  • Multiply your principal by your annual interest rate: $10,000 × 0.05 = $500.
  • Multiply this value by the number of years on the loan: $500 × 5 = $2,500.

Now that you know your total interest, you can use this value to determine your total loan repayment required: ($10,000 + $2,500 = $12,500).

Simple Interest vs. Compound Interest

Compound interest is another method of assessing interest. Unlike simple interest, compound interest accrues interest on both the initial sum as well as any interest that has already accumulated. In other words, on a compounding schedule, you pay interest on top of interest.

Over the long run, compound interest can cost you much more as a borrower, or earn you much more as an investor. Most credit cards and mortgages use compound interest. Savings accounts also offer compounding interest schedules.

Which is Better for You?

As a borrower, paying simple interest works in your favor, as you'll pay less over time. Conversely, earning compound interest means you'll net larger exponential returns over time on your regular savings accounts or investments.

For a quick example, consider our $10,000 loan at 5% interest repaid over five years:

  • Simple Interest: Total repayment is $12,500.
  • Compound Interest (Monthly): Over five years, you'd repay a total of $12,833.59. Over time, the difference between a simple interest and compound interest loan builds up exponentially.