View Simple Interest Growth Schedule
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Simple Interest Formula
The standard simple-interest relationship is I = P × r × t, where I is interest, P is principal, r is the annual rate written as a decimal, and t is time in years.
The same equation can be rearranged: P = I ÷ (r × t), r = I ÷ (P × t), and t = I ÷ (P × r). That is why this calculator can solve for any one of the four variables when the other three are known.
Months and Days: The Common Mistake
If the quoted rate is annual, time must be expressed in years before applying the formula. Six months is 0.5 years, not 6 years. For a day-based calculation, this page lets you choose a 365-day or 360-day year because the correct convention depends on the instrument or agreement.
The calculator's day-based result is arithmetic based on the selected convention. Real loans or deposits can use contractual day-count, payment, fee, balance and rounding rules that are more detailed than a basic simple-interest formula.
Simple Interest vs. Compound Interest
Simple interest is calculated only on the original principal. Compound interest periodically adds accumulated interest to the balance, allowing later interest to be earned or charged on a larger amount. The result panel shows a comparison using annual compounding at the same nominal annual rate purely to illustrate the mathematical difference.
Do not use this simple-interest calculator for a standard amortizing mortgage, auto loan or other account whose interest is calculated on a changing outstanding balance. Use the calculator that matches the product's actual terms.
Simple Interest FAQ
How do I calculate simple interest for months?
Convert months to years by dividing by 12, then use I = P × r × t. For example, 5 months is 5/12 of a year.
How do I calculate simple interest for days?
Divide the number of days by the day-count basis used by the agreement, such as 365 or 360, then multiply principal × annual rate × that year fraction.
Can I find the interest rate if I know the interest paid?
Yes. Rearrange the formula to r = I ÷ (P × t), then convert the decimal rate to a percentage.
Is simple interest the same as APR?
No. APR is a disclosure measure governed by rules that can account for finance charges and other terms. A simple annual interest rate used in I = P × r × t should not automatically be treated as an APR.
Why might a lender's result differ?
The actual contract may use a specific day-count convention, daily balances, changing balances, payment timing, fees, rounding or compounding. Use the agreement's stated method for an exact contractual calculation.