Simple Interest Calculator
The classic I = P × r × t — the formula behind short-term loans, bonds, and every math class.
Calculate simple interest
The simplest formula in finance
Simple interest is calculated on the original principal only — interest never earns interest. $10,000 at 6% for 3 years earns 10,000 × 0.06 × 3 = $1,800, total $11,800. The same money compounded annually grows to about $11,910 — the gap is interest-on-interest, and it widens dramatically with time and rate.
Where simple interest actually shows up
More places than you'd think: most auto loans and personal loans accrue simple daily interest on the remaining balance (which is why paying early saves money), Treasury bills and many bonds pay simple coupon interest, late fees and judgments often accrue simple statutory interest, and short-term lending between individuals usually uses it because everyone can verify the math on a napkin.
Simple vs. compound: when each wins
As a borrower, you want simple interest — your cost grows linearly, and early payments hit principal directly. As a saver, you want compounding — exponential beats linear at any rate, given enough time. At 6%, simple interest doubles your money in about 16.7 years; compounding does it in about 11.9. The formula is humble, but knowing which kind of interest you're being charged or paid is one of the most practically valuable checks in personal finance.
Frequently asked questions
How do I calculate simple interest for months or days?
Convert to years: 9 months is t = 0.75; 90 days is t = 90/365 ≈ 0.2466. Lenders sometimes use a 360-day year ('banker's interest'), which slightly increases the charge.
Is my car loan simple or compound interest?
Most US auto loans are simple daily interest on the outstanding balance. Each payment first covers accrued interest, then principal — so paying even a few days early genuinely reduces total interest.
Why does my result differ slightly from my lender's?
Day-count conventions (365 vs 360 days), the exact accrual start date, and rounding. Small gaps are normal; large ones deserve a phone call.
Which is better for a savings account?
Compound, always — and frequency matters a little: daily compounding beats monthly at the same stated rate. Compare accounts by APY, which bakes the compounding in.