Simple Interest Calculator
Flat interest on principal, without compounding — the basis of many short-term and informal loans.
Simple Interest Calculator
Formula
SI = P × R × T / 100 = 5,000 × 8% × 2.0000 = 800
Simple Interest
800
Total Amount
5,800
Effective Return
16.00%
Comparison: SI vs Compound Interest
flat rate on principal
compounded yearly
compounded monthly
Simple interest
Interest is charged only on the original principal. Nothing accrues on accrued interest.
I = P × r × t A = P + I
- I
- Total interest
- P
- Principal
- r
- Annual rate as a decimal
- t
- Time in years
Worked example
- Principal
- 50,000
- Rate
- 8% → 0.08
- Term
- 3 years
- Calculation
- 50,000 × 0.08 × 3
Interest 12,000 · Total repayable 62,000
The same amount compounded annually would produce 12,986 — about 8% more interest. The gap widens sharply with time: over 20 years, simple interest gives 80,000 and compound gives 183,000.
About
The Simple Interest Calculator applies the formula SI = (P × R × T) / 100, where P is Principal, R is annual Rate (%), and T is Time in years. It is used for short-term loans, certain savings accounts, and financial literacy. Results include the interest amount and the total amount (principal + interest) at maturity.
How to use
- 1 Enter the principal amount (loan or deposit).
- 2 Enter the annual interest rate as a percentage.
- 3 Enter the time period in years (decimals accepted, e.g. 1.5 for 18 months).
- 4 Simple interest and the total amount are calculated instantly.
- When is simple interest used in real life?
- Simple interest is used for short-term loans (personal loans under 1 year, car loans), Treasury bills and some government bonds, fixed deposits where interest is paid out periodically rather than reinvested, and in educational contexts to teach the basics of interest before introducing compound interest.
- How do I calculate simple interest for months instead of years?
- Enter the time in years as a decimal. For example, 6 months = 0.5, 3 months = 0.25, 18 months = 1.5. The formula SI = (P × R × T) ÷ 100 works with any decimal value for T. Alternatively, convert the annual rate to a monthly rate (divide by 12) and enter the number of months as T.
- What is the difference between simple interest rate and APR?
- A simple interest rate is the nominal annual rate applied to the original principal. APR (Annual Percentage Rate) includes the nominal interest rate plus all fees and costs of the loan, expressed as a yearly rate. For loans with origination fees, insurance, or other charges, the APR is always higher than the stated interest rate and gives a more accurate picture of the true cost of borrowing.
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