Simple Interest Calculator
Simple interest grows linearly on the original principal alone, no interest is ever charged on previously earned interest, making it straightforward for short-term loans, auto financing, bonds, and savings certificates. This calculator computes the interest and final balance forward, or reverse-solves the principal, rate, or time when you already know the others. Pick the time unit you actually have (days, weeks, months, quarters, or years), see a year-by-year breakdown, and optionally turn the interest into an effective monthly cost. Results are for general informational purposes; always verify with your lender or financial institution before making decisions.
Formula
Worked example
$1,000 at 5% for 3 years: I = 1000 × 0.05 × 3 = $150, for a final balance of $1,150. Reverse: turning $1,000 into $1,200 over 3 years needs r = (1200/1000 − 1) / 3 = 6.667%.
How Simple Interest Works
Simple interest multiplies the principal (the original amount) by the annual interest rate and by the time in years: I = P × r × t. The final balance is A = P + I = P × (1 + r × t). The interest added each year stays the same because it is always based on the starting principal, not on any accumulated balance, so the balance climbs in a straight line. This contrasts with compound interest, where interest accrues on both the principal and previously added interest, curving the balance upward over time. Most U.S. auto loans, short-term personal loans, and some U.S. Treasury securities use simple interest.
Choosing a time unit
Rates are usually quoted per year, so any term has to be converted to years before the formula is applied. This calculator does that for you: enter the term in days, weeks, months, quarters, or years and it divides by the right factor (365 or 360 days, 52 weeks, 12 months, or 4 quarters per year). The 360-day option matches the banker's year that many money-market instruments and commercial loans use, which produces slightly more interest than the 365-day basis for the same number of days. Partial periods are supported, so 18 months or 90 days work exactly.
Reverse-solving for principal, rate, or time
Because I = P × r × t has four linked quantities, knowing any three lets you find the fourth. Switch the "solve for" mode to work backward: enter the final balance plus two of principal, rate, or time, and the calculator rearranges the formula. Solving for principal uses P = A / (1 + r × t); solving for rate uses r = (A / P − 1) / t; solving for time uses t = (A / P − 1) / r. This answers questions like "what rate turns 1,000 into 1,200 over three years" or "how long until my deposit reaches a target".
Costing it and limitations
Turn on the cost view to express the total interest as an effective amount per month over the term, which is handy for comparing the carrying cost of short-term financing. The calculator assumes a fixed rate for the whole term with no partial payments, prepayments, or fees. Real loans often use amortized payment schedules, origination fees, or variable rates that this tool does not model, and an APR may bundle fees on top of the pure interest rate. Results are educational, not a binding quote. Consult a licensed professional or your lender for figures specific to your situation.
Time-unit conversions to years
| Time unit | Per year | Example term | In years |
|---|---|---|---|
| Years | 1 | 3 years | 3.000 |
| Quarters | 4 | 6 quarters | 1.500 |
| Months | 12 | 18 months | 1.500 |
| Weeks | 52 | 26 weeks | 0.500 |
| Days (365) | 365 | 90 days | 0.247 |
| Days (360) | 360 | 90 days | 0.250 |
How each term unit is divided to convert to years before the formula is applied.
Frequently asked questions
Is simple interest better or worse than compound interest for borrowers?
For borrowers, simple interest is generally less expensive than compound interest over the same term and rate, because interest accrues only on the original principal rather than on a growing balance. The longer the loan term, the more significant this difference becomes. This is why short-term consumer loans often use simple interest, while long-term mortgages and savings accounts typically use compound interest.
Do U.S. savings accounts use simple or compound interest?
The vast majority of U.S. deposit accounts, including high-yield savings accounts and money market accounts, use compound interest, compounded daily or monthly. Simple interest is more common on certain short-term instruments such as U.S. Treasury bills and some certificates of deposit. Always check your account agreement or loan disclosure for the compounding method that applies.
How do I find the rate or time if I only know the start and end amounts?
Switch the "solve for" mode at the top of the calculator. To find the rate, enter the principal, the final balance, and the time, and it applies r = (A / P − 1) / t. To find the time, enter the principal, final balance, and rate, and it applies t = (A / P − 1) / r. You can also solve for the principal needed to reach a target balance with P = A / (1 + r × t).
What is the difference between the 365-day and 360-day options?
They set how many days count as one year when you enter a term in days. The 365-day basis is the ordinary calendar year. The 360-day basis is the banker's year used by many money-market and commercial instruments; because it treats a year as shorter, the same number of days converts to a slightly larger fraction of a year and produces marginally more interest. Use whichever basis your contract specifies.
Can I use this calculator for a loan with monthly payments?
This calculator computes total interest on a lump-sum basis and does not model amortized loans with regular monthly payments. For an installment loan where each payment reduces the principal, and therefore the interest charged in later periods, a dedicated loan amortization calculator is more appropriate.