Simple Interest Calculator
The classic I = P × r × t — solved for whichever variable you're missing: interest, principal, rate, or time.
The simple interest formula, four ways
Deposit $5,000 at 6% simple interest for 3 years:
I = 5,000 × 0.06 × 3 = $900 → total value $5,900
You lend a friend $3,000 for 90 days and agree they'll pay back $3,059.18. What annual rate does that imply? First, interest = 3,059.18 − 3,000 = $59.18.
Time as a fraction of a year: t = 90 ÷ 365 = 0.2466. Rate = I ÷ (P × t) = 59.18 ÷ (3,000 × 0.2466) = 8% annually — the same 8% rate as a full-year loan, just prorated to the shorter 90-day term.
Common simple interest mistakes
- Using a whole-year rate for a partial-year term without converting t to a fraction. As above, a 90-day loan uses t = 90 ÷ 365, not t = 1 — skipping this step overstates interest by a factor of roughly 4.
- Solving for rate or time using the total repayment amount instead of the interest amount alone. Subtract principal from the total first to isolate I before plugging into r = I ÷ (P × t) or t = I ÷ (P × r).
- Assuming a "simple interest" loan can't compound in practice. If interest that isn't paid on time gets added to the principal balance, later interest charges are effectively compounding, even though the stated rate is simple.
Simple vs. compound: the growing gap
| Years ($5,000 at 6%) | Simple interest | Compound (annual) | Gap |
|---|---|---|---|
| 3 | $900 | $955 | $55 |
| 10 | $3,000 | $3,954 | $954 |
| 20 | $6,000 | $11,036 | $5,036 |
| 30 | $9,000 | $23,717 | $14,717 |
Simple interest grows in a straight line; compounding curves upward. That's good news when you're the borrower (many auto and student loans accrue simple daily interest) and the reason to prefer compounding when you're the saver — see the compound interest calculator for the full curve.
Frequently asked questions
What is the simple interest formula?
I = P × r × t. $5,000 at 6% for 3 years → $900.
What's the difference between simple and compound interest?
Simple charges on principal only; compound charges on principal + accumulated interest, so it grows faster every year.
What loans use simple interest?
Many auto, personal, and federal student loans (simple daily accrual). Credit cards compound.
How do I find the rate needed to reach a savings goal?
r = I ÷ (P × t). For $2,000 interest on $8,000 over 5 years: 2,000 ÷ 40,000 = 5% annually.
Can simple interest be calculated for less than a year?
Yes — use t as a fraction of a year (days ÷ 365). A 90-day, 8% loan on $3,000 accrues about $59.18, not the full-year $240.
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Note: Educational tool; actual accounts may accrue and compound differently. Not financial advice. Last reviewed: September 2026.