Simple Interest Calculator
Interest and total from principal, rate, and time — simple interest, not compound.
Updated
Interest earned
$150.00interest
$1,150.00 total value
- Principal
- $1,000.00
- Interest
- $150.00
- Total (principal + interest)
- $1,150.00
- Time in years
- 3
Estimates for general information, not financial advice.
In short
How much is simple interest on $1,000 at 5 percent for 3 years?
$150.00, because interest equals principal times rate times time in years: 1000 × 0.05 × 3 = 150, for a $1,150.00 total. Simple interest is charged on the original principal only, so the same $1,000.00 earns exactly $50.00 in year one, year two and year three without ever compounding.
Most consumer accounts and credit products compound instead, which produces a larger figure over the same period and needs a compound-interest calculation.
How to use the simple interest calculator
Enter your principal, which is the original amount, then the annual rate as a percent and a length of time, and flip the unit toggle to years or months. You get the interest earned and the new total. The defaults stand in for a typical short note: $1,000.00 at 5 percent for 3 years returns $150.00 in interest and a $1,150.00 total.
Change any one input and the result updates immediately, so you can watch how each piece moves the number. Because the relationship is linear in all three inputs, doubling the time doubles the interest, doubling the rate doubles it again, and doubling the principal does the same, which makes the results easy to sanity-check in your head.
$150.00
Interest at the defaults
$1,000.00 at 5% for 3 years
$1,150.00
Total repaid
principal plus straight-line interest
$50.00
Every single year
the same amount, never compounding
The one thing to be clear about is that this is simple interest, and that distinction is the entire point of the tool. Simple interest is charged only on the original principal and never on interest that has already accrued. Your $1,000.00 earns the same $50.00 in year one, year two and year three, because the rate is always applied to that flat $1,000.00 and to nothing else.
That is why the total grows in a straight line: equal steps, every period, for as long as the term runs. Plotted over time it is a ramp rather than a curve, and the absence of a curve is exactly what separates it from every compounding product you are likely to meet.
Simple interest is genuinely rare in consumer lending, which is worth saying because people often assume it applies when it does not. Where it does turn up: many US auto loans accrue interest on the outstanding principal daily without capitalising it, short-term promissory notes between individuals often use it because it is easy to verify by hand, and bond coupon payments are computed on the face value rather than on a growing balance.
Where it does not: credit cards, which compound and quote an annual percentage rate that assumes it, and savings accounts, which quote an annual percentage yield precisely because the yield already includes compounding.
Do
- Enter the annual rate as a percent, typing 5 rather than 0.05 for five percent.
- Set the unit toggle to months, or divide a term in months by 12 yourself.
- Check the agreement for compounding, an annual percentage yield or capitalising interest.
- Sanity-check the answer, since doubling any one input doubles the interest.
Don't
- Apply the rate to a balance that has grown, because only the original principal counts.
- Assume a credit card or a savings account works this way, as both compound instead.
- Read an APR as a plain annual rate, since it reflects compounding and certain fees.
- Expect this to match a lender accruing daily interest on a 365-day basis.
Need the rate arithmetic itself?
The percentage calculator turns a part into a rate and a rate into an amount, and it keeps a percentage point and a percent change apart, which rates make easy to confuse.
Open the percentage calculator →The same $1,000.00 at 5 percent, held as simple interest and as interest compounded once a year, so you can see where the two part company. The last column is the cost of assuming the wrong one over that term.
| Years held | Simple interest total | Compounded annually | The gap |
|---|---|---|---|
| 1 year | $1,050.00 | $1,050.00 | $0.00 |
| 2 years | $1,100.00 | $1,102.50 | $2.50 |
| 3 years (the tool default) | $1,150.00 | $1,157.63 | $7.63 |
| 4 years | $1,200.00 | $1,215.51 | $15.51 |
| 5 years | $1,250.00 | $1,276.28 | $26.28 |
| 6 years | $1,300.00 | $1,340.10 | $40.10 |
| 7 years | $1,350.00 | $1,407.10 | $57.10 |
| 8 years | $1,400.00 | $1,477.46 | $77.46 |
| 9 years | $1,450.00 | $1,551.33 | $101.33 |
| 10 years | $1,500.00 | $1,628.89 | $128.89 |
| 15 years | $1,750.00 | $2,078.93 | $328.93 |
| 20 years | $2,000.00 | $2,653.30 | $653.30 |
| 25 years | $2,250.00 | $3,386.35 | $1,136.35 |
| 30 years | $2,500.00 | $4,321.94 | $1,821.94 |
Where simple and compound part company
Compound interest works differently and is a separate calculation. Compounding adds each period’s interest back to the balance so the next period earns interest on a larger amount, which is interest on interest. Over a few months the two are nearly identical: $1,000.00 at 5 percent for one year is $50.00 either way if the compounding is annual.
Over years the gap opens steadily. At 5 percent on $1,000.00, simple interest reaches a $1,500.00 total after ten years while annual compounding reaches $1,628.89, and by thirty years it is $2,500.00 against $4,321.94.
Read it: The two agree exactly after one year with annual compounding and then diverge steadily; the longer the term, the more expensive it is to assume the wrong one.
Values from the reference table above.
The formula, worked line by line
Simple interest applies the rate to the original principal only. It never earns interest on prior interest, so the total grows in a straight line with time and the term can be scaled up or down without any of the compounding machinery.
The only conversion the formula needs is on time. The rate is annual, so a term quoted in months has to be divided by 12 before it enters the expression; six months is 0.5 years and eighteen months is 1.5. Getting that conversion wrong by a factor of twelve is the single most common mistake with this calculation.
interest = principal × (rate% ÷ 100) × time (time in years)
months ÷ 12 = years
total = principal + interest
1000 × 0.05 × 3 = 150.00, so total = 1,150.00- Principal
- $1,000.00
- Rate as a decimal
- 5 ÷ 100 = 0.05
- Time
- 3 years
- Interest
- 1000 × 0.05 × 3 = $150.00
- Total repaid
- $1,150.00
Run the same principal and rate for 6 months and the time converts first, 6 ÷ 12 = 0.5 years, giving $25.00 and a $1,025.00 total. Push the rate to 10 percent over 2 years and it is 1000 × 0.10 × 2 = $200.00. Scale the principal to $25,000.00 at 5 percent for 3 years and the interest is $3,750.00, exactly twenty-five times the first answer, because the expression is linear in every input.
That linearity is the defining feature. Double the time and the interest doubles; double the rate and it doubles again; the graph of the balance is a ramp with a constant slope of principal times rate per year. Compound interest replaces that ramp with a curve, because each period’s interest joins the balance and earns in the next period, which is why the straight-line answer here drifts further from a compounding product the longer the term runs.
Two practical cautions. First, real agreements often use day-count conventions rather than clean years, so a lender computing daily interest on a 365-day basis may produce a figure a few dollars away from the straight-line answer here.
Second, an APR on a credit product is not the same as a simple annual rate, because it is defined to reflect compounding and certain fees. Everything on this page is a general-information estimate of a formula, not financial advice and not a quote for any particular loan or deposit.
Questions people ask
What is simple interest?
Simple interest is interest charged only on the original principal, never on interest that has already accrued. Take the principal, multiply by the annual rate as a decimal, and multiply by the time in years, which is written as I = P × r × t. Because the rate always applies to the same fixed amount, the interest is identical in every period and the total grows in a straight line rather than a curve. On $1,000.00 at 5 percent, that is exactly $50.00 a year, every year, for as long as the term runs.
How is simple interest different from compound interest?
Simple interest is figured on the original principal alone, so it adds an equal amount each period. Compound interest adds each period’s interest back to the balance, so the next period earns interest on a larger amount, which is interest on interest. The two agree after one year with annual compounding and then diverge: on $1,000.00 at 5 percent, simple interest reaches a $1,500.00 total after ten years while compounding reaches $1,628.89, and after thirty years it is $2,500.00 against $4,321.94. Compounding needs a separate calculator.
How do I convert months to years for the formula?
Divide the number of months by 12, because the rate in the formula is annual. Six months becomes 0.5 years, eighteen months becomes 1.5 years, and thirty months becomes 2.5. The calculator does this automatically when you set the unit toggle to months, then runs interest = principal × (rate ÷ 100) × years. Forgetting the conversion is the most common error with this formula, and it is off by a factor of twelve, so the result is obviously wrong rather than subtly wrong.
Where is simple interest actually used?
It is much rarer in consumer lending than people assume. Many US auto loans accrue interest on the outstanding principal without capitalising it, short-term promissory notes between individuals often use it because it can be checked by hand, and bond coupon payments are calculated on the face value rather than on a growing balance. Credit cards, savings accounts and most long-term loans compound instead, which is why they quote an annual percentage rate or annual percentage yield that already accounts for compounding. Check which one your agreement names.
Does the interest change if I make payments during the term?
On a genuine simple-interest loan, yes, because interest accrues on the outstanding principal rather than on the original amount, so every payment that reduces the balance also reduces what accrues afterwards. Paying early in the month on a daily-accrual auto loan sends slightly more of the payment to principal. This calculator models the plain formula with a fixed principal for the whole term, so it will not reflect a repayment schedule. It is a general-information estimate of the formula, not a quote or an amortisation schedule for a specific loan.
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