Simple Interest Calculator
Calculate interest without compounding. Compare simple vs compound side by side, and convert annual rates to daily or monthly for short-term loans and savings.
Try a worked example
How to Use This Calculator
Tab "🧮 Calculate"
Enter a principal (the starting amount), an annual interest rate as a percentage (e.g. 5 for 5%), and a time period in years. The calculator instantly shows the interest earned and total amount using the simple interest formula.
Tab "⚖️ Simple vs Compound"
Use the same inputs to see simple interest and compound interest side by side. A bar chart shows how the gap widens over time — especially useful for long-term loans and investments. The longer the period, the more compounding outperforms simple interest.
Tab "📅 Daily / Monthly"
Enter an annual rate and convert it to a daily or monthly rate. Useful for short-term loans, bridging finance, and promissory notes. Enter the number of days or months to see the exact interest for that period.
The Formulas
I = P × r × t
A = P + I = P(1 + rt)
Where:
I = interest earned
P = principal (initial amount)
r = annual interest rate as a decimal (e.g. 5% = 0.05)
t = time in years
A = total amount (principal + interest)
Daily interest:
I = P × r × d / 365
Monthly interest:
I = P × r × m / 12
Compound interest (monthly, for comparison):
A = P × (1 + r/12)^(12t)
Simple interest is linear — the interest earned each year is always the same. Compound interest is exponential — each period earns interest on all previously accumulated interest.
Worked Examples
Example 1 — Savings: $10,000 at 5% for 3 years
A straightforward savings or investment scenario using the basic formula.
Formula: I = $10,000 × 0.05 × 3 = $1,500. Over 3 years the difference between simple and compound is modest — compounding matters much more over longer horizons.
Example 2 — Short-term loan: $50,000 at 8% for 90 days
Bridging loans, short-term business finance, and promissory notes typically use daily simple interest.
Formula: I = $50,000 × 0.08 × 90/365 = $986.30. The daily interest rate is 8% ÷ 365 = 0.02192% per day, or $10.96 per day on this principal.
Example 3 — The divergence: $10,000 at 7% over 30 years
This is why Albert Einstein allegedly called compound interest the "eighth wonder of the world".
The difference after 30 years: $21,000 (simple) vs $76,123 (compound monthly). Compounding multiplied the investment 7.6×; simple interest only 3.1×. This is why long-term investors always prefer compound interest, while lenders sometimes offer simple interest to keep costs predictable for borrowers.
Simple Interest — Key Facts
| Property | Simple Interest | Compound Interest |
|---|---|---|
| Interest base | Principal only | Principal + accumulated interest |
| Growth type | Linear | Exponential |
| Formula | I = P × r × t | A = P × (1 + r/n)^(nt) |
| Common uses | Short-term loans, car loans, bonds | Savings accounts, mortgages, investments |
| Benefit for borrower | Lower total cost | Higher total cost |
| Benefit for investor | Predictable returns | Accelerating returns |
| Calculation complexity | Simple | Requires compounding frequency |
When Simple Interest Is Used
Simple interest is the standard for several real-world financial products:
- Short-term personal loans — Many consumer lenders advertise a flat rate and calculate interest on the original principal only.
- Car loans (amortised) — US auto loans are typically simple interest; you pay interest on the outstanding balance each day.
- Treasury bills — Government short-term debt instruments are priced using simple interest (discount basis).
- Bonds between coupon dates — Accrued interest is calculated on a simple interest basis.
- Bridging and hard-money loans — Short-term real estate finance often uses daily simple interest.
- Student loans — Many countries calculate interest accrual during study periods using simple interest.
- Informal lending — Flat-rate agreements between individuals or businesses.
Understanding whether your loan or investment uses simple or compound interest is critical — the difference can be tens of thousands of dollars over a decade.