What is simple interest?

Simple interest is calculated only on the original principal — it does not compound. It grows linearly with time.

How is it different from compound interest?

Compound interest earns interest on both the principal and previously earned interest. Simple interest stays proportional to the original amount.

What units should I use for the rate?

Enter the annual interest rate as a percentage. For 5% per year, enter 5. For a monthly rate, multiply by 12 before entering.

What is the simple interest formula?

Simple interest is I = P x R x T / 100 when R is entered as an annual percentage rate and T is measured in years.

Can simple interest be used for months?

Yes. Convert months to years first. For example, 6 months is 0.5 years and 18 months is 1.5 years.

Simple Interest Calculator

Quick answer: simple interest formula

Simple interest is calculated with:

I = P × R × T / 100

Where I is interest, P is principal, R is the annual interest rate as a percent, and T is time in years. The total amount is:

Total = Principal + Interest

For example, a $1,000 principal at 5% simple interest for 3 years earns $150 interest, so the total amount is $1,150.

How to use the Simple Interest Calculator

Enter the principal — the initial amount invested or borrowed.
Enter the annual rate as a percentage (e.g. 5 for 5%).
Enter the time in years. Decimals are accepted (e.g. 1.5 for 18 months).
The interest and total amount update instantly.

Use this calculator for quick savings estimates, loan interest checks, note repayment examples, classroom finance problems and comparison against compound interest.

Formula details

$$I = \frac{P \times R \times T}{100}$$

Where P = principal, R = annual rate (%), T = time (years).

The total repayment or total value is:

$$\text{Total} = P + I$$

Example

A $1,000 deposit at 5% per year for 3 years:

$$I = \frac{1000 \times 5 \times 3}{100} = $150$$

$$\text{Total} = $1,150$$

More worked examples

Principal	Rate	Time	Interest	Total
$500	6%	2 years	$60	$560
$2,000	4.5%	18 months	$135	$2,135
$10,000	3%	90 days	about $73.97	about $10,073.97

For partial years, convert the time before calculating:

18 months = 18 / 12 = 1.5 years
90 days ≈ 90 / 365 = 0.2466 years

Solving for principal, rate or time

The same formula can be rearranged when you know the other values:

Principal = Interest × 100 / (Rate × Time)
Rate = Interest × 100 / (Principal × Time)
Time = Interest × 100 / (Principal × Rate)

Example: if you earned $240 interest on $2,000 over 3 years, the rate was:

240 × 100 / (2000 × 3) = 4%

Simple interest vs compound interest

Simple interest grows in a straight line because interest is calculated only on the original principal. Compound interest grows faster because each period’s interest is added back to the balance and can earn more interest later.

For short loans, classroom examples and flat-rate notes, simple interest is often enough. For savings accounts, credit cards, mortgages and investments, compound interest is usually the better model.