What is the simple interest formula?

Simple interest is calculated as I = P × r × t, where P is the principal, r is the annual interest rate expressed as a decimal, and t is the time in years. The total amount owed or received is A = P + I.

How does this calculator convert months or days to years?

Months are divided by 12, and days are divided by 365 to convert them to a fractional year value used in the formula. For example, 90 days becomes 90 ÷ 365 ≈ 0.2466 years.

What is the difference between simple and compound interest?

With simple interest, interest is calculated only on the original principal and never on previously earned interest. With compound interest, interest earned in each period is added to the principal and itself earns interest in subsequent periods, leading to exponential growth over time.

Why is the compound interest figure higher?

The comparison card uses annual compounding, meaning interest is added to the principal once per year. Over multiple years, each year's interest becomes part of the base for the next year's calculation. The longer the time horizon and the higher the rate, the larger the gap grows between simple and compound results.

When is simple interest used in practice?

Simple interest is commonly used for short-term loans, auto loans, certain personal loans, and some savings instruments such as fixed deposits with periodic payouts. Most long-term investments and mortgages use compound interest.

What is the simple interest on $1,000 at 5% for 3 years?

Using I = P × r × t, the interest is 1000 × 0.05 × 3 = $150. The total amount owed or received after 3 years is $1,150. For reference, 4% simple interest on $100,000 is $4,000 per year.

Simple Interest Calculator

Name: Simple Interest Calculator
Availability: InStock
Author: Nham Vu

Enter a principal, annual rate, and time period to instantly see your simple interest, total amount, per-year breakdown, and a comparison against compound interest.

Loan / Investment Details

Principal

Annual Interest Rate

Time Period

Currency

Enter your details and click Calculate

Simple interest, total amount, and comparison will appear here

Simple Interest Earned

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Principal

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Total Amount

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Rate

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Time (years)

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Year-by-Year Accrual

Year	Interest This Year	Cumulative Interest	Total Amount

Compound Interest Comparison (Annual)

Compound Total

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Compound Interest

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Extra from Compounding

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Using annual compounding: A = P × (1 + r)^t

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Summary

Enter a principal, annual rate, and time period to instantly see your simple interest, total amount, per-year breakdown, and a comparison against compound interest.

How it works

Enter the principal — the starting amount of money you are lending or investing.
Enter the annual interest rate as a percentage (for example, 5 for 5%).
Enter the time period and choose whether it is expressed in years, months, or days.
Select your preferred currency symbol.
Click Calculate to see simple interest, total amount, a year-by-year accrual table, and a comparison card showing what the same scenario would yield under annual compound interest.

Use cases

A borrower checking how much flat interest accrues on a short-term personal loan before signing.
A student verifying simple-interest homework problems and comparing results to compound interest.
A small business owner estimating the cost of a 90-day trade-credit arrangement at a stated annual rate.
An investor comparing a simple-interest fixed deposit offer to a compounding alternative.

Frequently Asked Questions

Last updated: 2026-06-09 · Reviewed by Nham Vu