How simple interest calculator works
Simple interest is interest calculated only on the original principal, not on accumulated interest. The formula is straightforward: interest equals principal times annual rate times time (I = P × r × t), with the rate expressed as a percentage. The total you repay or receive is the principal plus the interest.
Enter the principal amount, the annual interest rate as a percentage, the time period, and the unit of time (years, months, or days). The calculator converts months and days into a fraction of a year — months divide by 12 and days divide by 365 — before applying the formula, so the rate always stays annual.
Simple interest is used for short-term loans, some car loans, promissory notes, and basic savings. Most mortgages and credit cards use compound interest instead, where interest earns interest over time. Use the related Compound Interest Calculator for those cases.