Simple Interest Calculator

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Enter a principal, rate and number of years to get the interest and total, with a per-day auto loan example and a note on UK statutory interest below.

Quick answer: Simple interest applies only to your original principal: the formula is I = P × r × t. On $8,000 at 6% for 3.5 years, that's $8,000 × 0.06 × 3.5 = $1,680 in interest, for a total repayment of $9,680.

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Total Amount

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Interest Earned$0
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📐 Formula

I = P × r × t, where I = interest, P = principal, r = annual rate (decimal), t = time in years

How to Use the Simple Interest Calculator

1

Enter the principal

Input the original loan or investment amount, the starting balance before any interest applies.

2

Enter the annual rate

Input the interest rate as a percentage per year. For periods under one year, enter the time as a fraction of a year (see the next step).

3

Set the time period

Enter duration in years. For partial years: 6 months = 0.5, 3 months = 0.25, 90 days ≈ 0.247.

4

Compare to compound

Run the same principal and rate through the Compound Interest Calculator to see how the total diverges from simple interest over longer periods.

Simple Interest vs Compound Interest: The Key Difference

Simple interest is calculated only on the original principal. Compound interest is calculated on principal plus all previously accumulated interest. On a $5,000 principal at 8% for 3 years: simple interest = $5,000 × 0.08 × 3 = $1,200 interest, $6,200 total. Compound (annual): $6,299, only $99 more over 3 years. Over 20 years: simple = $13,000; compound = $23,305, a $10,305 difference on the same principal and rate. The divergence grows exponentially with time.

Where Simple Interest Is Used in Practice

Most US auto loans charge daily simple interest on the outstanding balance, so the date each payment lands changes the interest you pay. Short-term personal loans and some bridge loans also use simple interest. Student loans accrue simple interest while you are in school, and on some loans, unpaid interest can later be added to the principal (capitalized) after certain events, such as the end of a deferment. Knowing which type of interest applies to a loan tells you how to plan your payments. See the Auto Loan Calculator for a full payment breakdown on exactly this kind of loan.

Simple Interest in Auto Loans: Pay Earlier, Pay Less

Every day you hold an auto loan, interest accrues on the current balance: annual rate ÷ 365 × balance, the per-diem method worked through below. Paying three days early each month cuts three days of interest from that month's charge, a small but real saving over a 60-month loan, and paying three days late adds three days. The lender recalculates the interest and principal split for each payment from the date it actually arrives, rather than following a fixed schedule set on day one. Before you rely on early payoff, check the loan agreement for a prepayment penalty, and for the "Rule of 78" (an older method, largely phased out, that front-loads interest and shrinks the savings from paying off early).

How to Calculate Simple Interest by Hand: Worked Example

Simple interest formula: I = P × r × t. Using the same numbers as the Quick Answer above, on $8,000 at 6% for 3.5 years: I = $8,000 × 0.06 × 3.5 = $1,680.00 in interest, for a total repayment of $9,680.00.

Compare the same numbers under annual compounding: A = $8,000 × 1.06³·⁵ ≈ $9,809.81, meaning $1,809.81 of interest, $129.81 more than simple interest over the same period. Over short periods and small principals the gap is modest; it widens quickly with longer terms or higher balances. Run the same principal through the Compound Interest Calculator to see the full divergence over decades.

How do you calculate simple interest for a partial year?

Use a daily or per-diem rate: annual rate ÷ 365 × principal × number of days. On an $18,000 auto loan at 5.5% for 40 days: daily interest = $18,000 × 0.055 ÷ 365 = $2.71/day; over 40 days that is $108.49. Auto loans and many personal loans calculate interest with this per-diem method.

Why do bonds and CDs sometimes quote simple interest?

Short-term instruments (under one year) commonly quote simple interest because the compounding difference over such a short period is negligible, and it keeps the quoted yield easy to verify by hand with I = P × r × t.

Using This Calculator in the US, UK, Australia, and Canada

I = P × r × t is the same formula everywhere, so the currency selector above changes only the symbol shown, not the math.

United Kingdom: statutory interest on judgment debts

The UK sets two statutory interest rates that follow the same simple-interest calculation on the overdue amount. In England and Wales, High Court judgment debts accrue interest at 8% a year under section 17 of the Judgments Act 1838, the rate set by the Judgment Debts (Rate of Interest) Order 1993 (SI 1993/564). County Court judgments of £5,000 or more accrue interest at the same 8% rate under the County Courts (Interest on Judgment Debts) Order 1991 (SI 1991/1184).

United Kingdom: statutory interest on late commercial payments

Late-paid commercial invoices accrue statutory interest at 8% over the Bank of England Bank Rate under the Late Payment of Commercial Debts (Interest) Act 1998, with the 8% margin set by SI 2002/1675 art. 4. The reference Bank Rate is the one in force on 30 June for interest that starts to run between 1 July and 31 December, and the one in force on 31 December for interest that starts between 1 January and 30 June. For interest starting in the second half of 2026, that is 8% plus the 3.75% Bank Rate in force on 30 June 2026, or 11.75% a year.

Australia and Canada

In Australia and Canada, the math and terminology are the same as the US; only the currency changes.

⚠️ Disclaimer Simple interest results are illustrative; actual loan terms, day-count conventions and per-diem rates vary by lender and loan type.

Frequently Asked Questions

This calculator's formula applies the rate to the original principal only, so every year adds the same dollar amount of interest. Compound interest adds each period's interest to the balance, so later interest is charged on earlier interest and a long-term investment or loan pulls well ahead of its simple-interest equivalent at the same rate. On an amortizing loan, simple interest is charged on the declining balance each day but unpaid interest does not compound.
Standard savings accounts pay compound interest, since interest earned starts earning its own interest at each compounding period. Simple interest turns up mostly on loans, and on some short-term CDs and bonds.
For monthly simple interest, use I = P × (r/12) × t, where t is the number of months. This calculator's time field is in years, so keep the annual rate in the rate field and enter t/12 in the years field. On $10,000 at 6% for 9 months, enter 0.75 years: $10,000 × 0.06 × 0.75 = $450.
Not in this calculator's flat sense. Credit cards compound: interest is added to the balance and then earns or costs interest of its own. A standard US mortgage charges interest on the outstanding balance as it declines each month, so it is simple interest on a declining balance, with no interest charged on interest, but it is not this calculator's flat I = P × r × t either.
Simple interest is good for borrowers, since unpaid interest doesn't compound on its own: you pay less over time than on an equivalent compound-interest loan at the same rate. For savers it is the reverse, because simple interest earns less than compounding would. Compounding favors whoever is owed the interest: the lender on a credit card, and you on a savings account.

Sources & Methodology

The formula is I = P × r × t. The UK statutory-interest figures above come from these primary sources: