Simple Interest Calculator
Calculate simple interest and the maturity amount on a principal sum, for any annual rate, period and currency without compounding.
Written by Rahman · Last reviewed
Quick answer
Simple interest is (P × R × T) ÷ 100 and is charged only on the original principal; interest already earned never joins the balance. That makes it cheaper than compound interest for a borrower and worse for a saver. It is common on short-term loans, some car finance and certain fixed deposits.
- Principal10,000.00 (74.1%)
- Total interest3,500.00 (25.9%)
- Total13,500.00
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own: put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time. Check current rates and speak to a qualified adviser before acting on them.
About the Simple Interest Calculator
Simple interest is calculated only on the original principal for the entire term; earlier interest is never added back to the balance. It is commonly used for short-term loans, some fixed deposits and many car or personal loans.
This calculator shows the interest earned or charged and the final maturity amount, making it easy to see the cost of borrowing or the return on a short-term deposit.
Interest = (P × R × T) / 100
P is the principal, R is the annual interest rate as a percentage, and T is the time in years. The maturity amount is P + Interest.
Where the two methods separate
Simple interest is charged on the original principal only, so the amount added is the same every year. Compound interest is charged on the balance including interest already earned, so each year's addition is larger than the last. Over short periods the two are close; over long ones they diverge sharply.
On $10,000 at 6%, simple interest reaches $13,000 after five years against $13,382 compounded, a difference of $382. After ten years the gap is $1,908. After twenty it is $10,071, with simple interest at $22,000 and compounding at $32,071. The rate and the principal never changed; only the method did.
- As a borrower, simple interest is the cheaper arrangement. As a saver or investor, compounding is what you want.
- The divergence accelerates. Most of the $10,071 gap above accumulates in the second decade, not the first.
- Doubling the term more than doubles the compound interest, while it exactly doubles the simple interest.
Where simple interest is actually used
Most consumer products compound, which is why simple interest is often treated as a teaching device rather than a real arrangement. It does appear in practice, but usually in specific places.
Many car loans and personal instalment loans are written as simple-interest agreements, where interest accrues daily on the outstanding principal and each payment covers the accrued interest first. Short-term bridging finance, some bonds paying periodic coupons, and many statutory interest calculations also use it.
- On a simple-interest loan, paying early in the billing cycle reduces the interest accrued, because accrual is daily on the balance.
- Fixed deposits and savings accounts almost always compound, at a frequency stated in the terms: daily, monthly or annually.
- Where a product quotes both a rate and an APY, the difference between them is the compounding.
A year is not always 365 days
The formula takes time in years, so a term stated in days has to be divided by something, and the agreement decides what. Many agreements divide by 365. Money-market instruments commonly divide by 360 (US Treasury bills are priced on a 360-day year) and some loan agreements do the same while still charging for every actual day, which quietly raises the cost.
- $10,000 at 6% for 90 days on a 365-day year: $147.95 of interest.
- The same on a 360-day year: $150.00.
- Held for a full calendar year on the 360-day basis, the interest is $608.33 rather than $600, an effective 6.083% on a loan quoted at 6%.
The same daily arithmetic explains why months differ on a simple-interest loan. $20,000 at 7.3% accrues exactly $4 a day, so a 31-day month costs $124 and a 30-day month $120, and a payment made ten days late carries $40 more interest, which comes out of the amount that would have reduced the principal. To use this calculator for a term in days, enter days ÷ 365, or days ÷ 360 if that is what the agreement specifies.
Frequently Asked Questions
When is simple interest used?
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It is common for short-term loans and instruments where interest does not compound, such as some personal loans, car loans and short fixed deposits.
Does simple interest grow as fast as compound interest?
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No. Because interest is never added to the principal, simple interest produces lower returns than compound interest over the same period.
Can the time period be in months?
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Yes. Convert months to years by dividing by 12 before entering the value (for example, 18 months is 1.5 years).
What is the maturity amount?
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It is the total you receive or repay at the end of the term: the original principal plus all the simple interest.
Sources
- TreasuryDirect — Understanding pricing and interest rates — The US Treasury's own explanation of how a Treasury bill is priced, cited for the 360-day year in the section above: the purchase price is face value × (1 − discount rate × days ÷ 360). The 365-day and 360-day figures on this page are arithmetic; this source backs only the existence of the 360-day convention.