Simple Interest Calculator
I = P x r x t, solved for interest, principal, rate or time
Last updated: October 2026
Your inputs
The calculation
$5,000.00 x 6.000% x 3 years = $900.00
Simple vs compound over time
| Years | Simple interest | Compounded annually | Difference |
|---|---|---|---|
| 1 | $300.00 | $300.00 | $0.00 |
| 5 | $1,500.00 | $1,691.13 | $191.13 |
| 10 | $3,000.00 | $3,954.24 | $954.24 |
| 20 | $6,000.00 | $11,035.68 | $5,035.68 |
| 30 | $9,000.00 | $23,717.46 | $14,717.46 |
How simple interest works
Simple interest is charged or paid only on the original principal. Multiply the principal by the annual rate and by the time in years. Nothing is added to the base, so every year earns the same dollar amount.
I = P x r x t P = I / (r x t) r = I / (P x t) t = I / (P x r)
Time must be in years. Six months is 0.5 years. For days, divide by 365 under the actual/365 convention or by 360 under actual/360. The 360-day year makes each day worth slightly more, which is why lenders on commercial loans tend to use it.
Worked example
You lend a relative $5,000 at 6% simple interest for 3 years.
- Interest: $5,000 x 0.06 x 3 = $900, or $300 a year.
- Repayment at the end: $5,900.
- Compounded annually, the same loan would earn $955.08, $55.08 more.
- Over 90 days, $10,000 at 5% earns $123.29 on a 365-day basis and $125.00 on a 360-day basis.
For a family loan above certain amounts, the IRS expects at least the applicable federal rate. Ask a tax professional before setting the rate.
Frequently Asked Questions
What is the simple interest formula?
Interest = Principal x Rate x Time, or I = P x r x t, with the rate as a decimal and time in years. $5,000 at 6% for 3 years earns 5,000 x 0.06 x 3 = $900, so you end with $5,900. The interest is the same every year because it is only ever charged or paid on the original principal.
How do I calculate simple interest for days or months?
Convert the time to years first. For months divide by 12. For days divide by 365, or by 360 if the contract uses the 360-day convention. $10,000 at 5% for 90 days earns $123.29 on a 365-day basis and $125.00 on a 360-day basis.
What is the difference between the 365-day and 360-day conventions?
Under actual/365 a day is 1/365 of a year. Under actual/360, common on commercial loans, Treasury bills and money market instruments, a day is 1/360 of a year, so each day carries slightly more interest: about 1.4% more over a full year. Check your loan note or account agreement to see which one applies.
Simple vs compound interest: which is better?
As a saver you want compound interest, because interest earns interest. As a borrower you want simple interest. $5,000 at 6% for 3 years earns $900 simple and $955.08 compounded annually. The gap widens with time: over 30 years the same $5,000 earns $9,000 simple but $23,717.46 compounded annually.
Which loans use simple interest?
Most US auto loans and many personal loans are simple interest loans: each payment covers the interest accrued on the outstanding balance since the last payment, and the rest reduces principal. Paying early or extra reduces the interest you pay. Mortgages also charge interest on the outstanding balance only. Credit cards, by contrast, compound daily on unpaid balances.
How do I find the rate or the time with this calculator?
Choose what to solve for. To find the rate, enter the principal, the interest and the time: r = I / (P x t). To find the time, enter the principal, the rate and the interest: t = I / (P x r). To find the principal, enter the interest, the rate and the time: P = I / (r x t).