maratoolHow to calculate simple interest with I = P·r·t
Multiply principal by rate by time. That's the whole formula, and this calculator runs it in any time unit.
Simple interest is the one interest formula you can do on a napkin: I = P × r × t. Borrow $1,000 at 5% a year for 3 years and the interest is 1,000 × 0.05 × 3 = $150. The Simple Interest Calculator runs the same arithmetic and also shows what the money would do if it compounded instead.
How it works
- Principal is the amount borrowed or invested.
- Rate is the annual percentage. The formula uses it as a decimal, so 5% becomes 0.05.
- Time must be in years. Pick months or days in the unit dropdown and the calculator divides by 12 or 365 for you.
Where simple interest still shows up
Most consumer debt compounds, but car loans, short-term personal loans, treasury bills, and late-payment penalties are commonly quoted as simple interest. Course problems in finance classes almost always start here too, because the formula isolates the three variables before compounding complicates them.
The gap between simple and compound
The third result card shows the same principal at the same rate, compounded once a year. At 5% over 3 years the difference is small: $150 simple against $157.63 compound. Stretch it to 20 years and the gap widens to $1,000 against $1,653. Interest on interest is the entire story of long-term investing, which is why savings products compound and short loans often don't.