Simple interest formula and example
Simple interest is calculated only on the original principal. Unlike compound interest, it does not add previously earned interest back to the amount that earns interest in later periods. In this calculator, the time you enter is measured in years.
Formula
I = P × r × t, where P is principal, r is the annual rate as a decimal, and t is time in years. The total amount is A = P + I.
Worked example
A principal of $5,000 at 5% simple interest for 3 years earns $5,000 × 0.05 × 3 = $750 in interest. The total after that period is $5,750, before any taxes or fees.
If your time period is in months, convert it to years before entering it (for example, 6 months is 0.5 years). Real loans or savings products can use different accrual methods, fees, or compounding rules; check the agreement rather than assuming it uses simple interest.
Tips for accurate results
Simple interest is I = P × r × t, where the rate is annual and the time is in years. For $2,000 at 5 percent for 3 years, the interest is $300 and the total is $2,300. Convert months to years by dividing by 12.
Common mistakes and limits
Simple interest does not add earned interest to the base, so it grows more slowly than compound interest over long periods. Many bank accounts and most credit products compound, so check which type applies before relying on a simple calculation.
Learn more: How compound interest works.