Simple Interest Calculator
I = P × r × t, solved any way round: find the interest, the principal, the rate or the time. Then see how far simple interest falls behind compounding.
Simple vs compound
At your time point: simple $1,500.00 vs compounded $1,614.72 (difference $114.72).
When loans use simple interest
I = P × r × t
Simple interest never charges interest on interest. That makes it the fairest structure for a borrower, and it's how most US car loans and federal student loans accrue: interest builds each day on the principal you currently owe. Pay early in the month, or pay extra, and less interest accrues before the next due date.
An amortizing loan is really a string of simple-interest months: each month's interest is the balance × annual rate ÷ 12, and the rest of your payment reduces the principal. The loan interest guide walks through it payment by payment.
Questions people ask
What is the simple interest formula?
I = P × r × t: interest equals principal times the annual rate (as a decimal) times time in years. $10,000 at 5% for 3 years earns or costs $10,000 × 0.05 × 3 = $1,500.
How is simple interest different from compound interest?
Simple interest is always charged on the original principal. Compound interest is charged on principal plus interest already added, so it grows faster. The chart above shows both for the same inputs.
Which loans use simple interest?
Many US auto loans are "simple interest loans", meaning interest accrues daily on the current principal balance, not added upfront. Federal student loans also accrue simple interest. Short-term notes and some personal loans quote simple interest too.
How do I calculate simple interest for days?
Use t = days ÷ 365 (some lenders use 360). Choose "Days" as the unit and the calculator converts it for you.