💵 Simple Interest Calculator
Enter the principal, annual interest rate, and period to calculate simple interest and final amount.
Simple Interest Formula
I = P × r × t
A = P × (1 + r × t)
- P: Principal
- r: Annual interest rate
- t: Period (years)
- I: Interest amount
- A: Final amount
Simple interest is calculated only on the original principal. It is straightforward but yields less than compound interest over time.
Worked Examples
1,000,000 at 5 % for 3 years earns 150,000, for a total of 1,150,000.
On a 3-month loan of 1,000,000 at 5 % the interest is 1,000,000 × 0.05 × 3/12 = 12,500.
When Simple Interest Applies
Simple interest never compounds, so it is the right model for short loans, promissory notes and many consumer credit agreements. Most savings products, credit cards and mortgages use compound interest instead, and day-count conventions (365 or 360 days) can shift the result slightly.
Frequently Asked Questions
- What is the formula for simple interest?
- I = P × r × t, where P is principal, r the annual rate as a decimal and t the term in years. Total repayment is P + I.
- How do I convert months to years?
- Divide the months by 12: three months is 0.25 years. For days, divide by 365, or by 360 if the contract uses a 360-day year.
- Where is simple interest used in practice?
- In short-term loans, car finance, some student loans, bonds that pay coupons without reinvestment, and simple savings accounts.