What is simple interest?
Simple interest is one of the easiest ways to estimate how much interest you’ll earn or pay over time. Instead of “interest on interest,” it’s based only on the original amount (called the principal).
How to calculate simple interest
You can use this straightforward formula:
- Interest (I) = Principal (P) × Rate (r) × Time (t)
- Total (A) = Principal (P) + Interest (I)
Here, the rate is typically an annual percentage, and time is in years (or you can convert months to years).
Try the simple interest calculator
Enter your principal, annual interest rate, and time, and you’ll instantly see the interest and total amount. It’s great for quick estimates for savings, loans, or budgeting.
Amount
Percent (%)
Years
Simple interest (I)
—
Total amount (A)
—
Formula: I = P × r × t (with r as a decimal). Total: A = P + I.
Quick example
If you invest $1,000 at 5% per year for 2 years, the interest is:
I = 1000 × 0.05 × 2 = $100. So your total is $1,100.
Common tips
- Make sure your time matches your rate (convert months to years if needed).
- Rates entered as percentages should be converted to decimals automatically by the calculator.
- For loans with compounding, simple interest may be only an estimate.