Simple Interest Calculator
Calculate simple (non-compounding) interest: enter the principal, the rate and the time to see the interest earned and the final amount.
Fill in principal, rate and time to see the result.
How it works
Simple interest grows linearly: it is always calculated on the original principal, never on interest already earned. The formula is
Interest = Principal × rate × time
with the rate and the time expressed in the same period. This calculator works in months: if your rate is annual, pick "per year" and it is converted to a monthly equivalent (divided by 12, which is exactly how simple interest scales). The total is simply principal + interest.
The contrast with compound interest matters: at 1% per month, $1,000 earns $120 of simple interest in a year, but $126.83 compounded — and the gap widens dramatically over longer terms.
When to use
Simple interest shows up in short-term lending between individuals, some late-payment penalties, certain short-term notes and bonds, and as the basis of many contractual penalty clauses. It's also the first model taught in school, so this calculator doubles as a homework checker.
Use it too as a baseline: compare the simple-interest result with our compound interest calculator on the same numbers to see exactly how much compounding adds over time.
Practical examples
Short personal loan
You lend $2,000 to a friend at 1.5% per month for 8 months. Interest = 2000 × 0.015 × 8 = $240, so they return $2,240.
Annual rate, monthly term
A note pays 12% per year and you hold it for 18 months. Select "per year": the monthly equivalent is 1%, so interest = 1000 × 0.01 × 18 = $180 on a $1,000 principal.
Common mistakes
The classic mistake is mixing periods: an annual rate with time in months overstates the interest twelvefold. Rate and time must refer to the same unit — this calculator handles the conversion when you mark the rate as yearly, but double-check which one your contract states.
The other trap is assuming a quoted rate is simple when it compounds (or vice versa). Credit cards, financing and most investments compound; using this calculator for them underestimates the real cost or gain. When in doubt, check whether the contract says interest is charged "on the outstanding balance" (compound) or "on the principal" (simple).
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is always computed on the original principal, so it grows linearly. Compound interest is computed on principal plus accumulated interest, so it grows exponentially. Over short terms the difference is small; over years it becomes enormous.
How do I convert an annual rate to monthly for simple interest?
For simple interest, just divide by 12 — 12% per year equals 1% per month. (Note this shortcut is only exact for simple interest; compound rates convert with exponents instead.)
Does the calculator work for days instead of months?
Yes, by proportion: enter the time in months as days ÷ 30 (commercial convention) and keep a monthly rate. For example, 45 days = 1.5 months.
Is interest on overdue bills simple or compound?
It varies by contract and jurisdiction. Late fees are often a fixed percentage plus simple interest per month, but always check the specific contract terms.