Simple interest calculator and formula

Published August 16, 2026

Simple interest pays only on the original sum. Interest is principal times rate times years. On $1,000 at 5 percent for 3 years, interest is $150 and the total is $1,150.

Interest

$150.00

Total repaid or received is $1,150.00.

Principal: $1,000.00
Interest: $150.00
Total: $1,150.00

Principal

Annual rate

A decimal rate in the formula. 5 here means 0.05, not 5 percent compounded.

Time in years

Eighteen months is 1.5 years. Simple interest does not care how you slice the year.

The formula

I = Prt \qquad A = P(1 + rt)

$P$ is the original principal, $r$ the annual rate as a decimal, and $t$ time in years. $I$ is the interest. $A$ is principal plus interest. Eighteen months is $t = 1.5$ .

The same slice, every year

Simple interest never looks at interest already paid. The rate applies to the original principal for the whole term, so each year adds the same amount as the year before. On $1,000 at 5 percent that amount is $50, every year. Three years produce $150 of interest and a total of $1,150. The line is straight.

That is the rule a first algebra class actually meets: multiply three numbers. It is also the rule a lot of short consumer credit still uses, as long as each period's interest is paid as it falls due and is not folded into the balance.

The simple against compound interest page is the pair. Compounding is a different object: it pays on the balance, so the amount added grows. Do not file this page under 'the easy version of compounding'. It is a different formula.

Time is just time

Because the rate applies to the original sum, the way you slice the year does not change the answer. Five percent for 18 months is $0.05 \times 1.5$ , not a monthly rate that then compounds. On $5,000 at 4 percent for 1.5 years, interest is $300 and the total is $5,300.

A quoted rate without a time unit is not yet a complete input. Five percent a year for two years is not five percent a month for two months. Put the rate and the time in the same units before you multiply. This calculator takes an annual rate and time in years, including fractions.

If the product actually compounds, this page will understate the total. The compound interest calculator is the other rule.

A longer term makes the gap visible

On $2,000 at 6 percent for 10 years, simple interest is $1,200 and the total is $3,200. That is a 60 percent add-on. Annual compounding on the same stake adds about 79 percent instead of 60, which is the gap how compound interest works is for.

The two rules agree over a single year when compounding happens once a year: both add 6 percent of $2,000, which is $120. They part as soon as unpaid interest is allowed to sit on the balance. A loan that is serviced in full each period, interest paid as it accrues, behaves like this page even if the paperwork says compounding.

So the honest question is not 'which formula sounds more advanced'. It is whether interest is allowed to earn interest.

What this page is not doing

It is not a compounding engine, not an amortisation schedule, and not a quote for a specific product. A US credit card is almost never simple interest on a carried balance. A US student loan often accrues on principal (a simple-interest rule) and then capitalises that interest at defined events, after which the new principal compounds in all but name.

Treat the output as what $Prt$ produces from the three inputs you typed. For a payment that has to clear a balance, use the loan payment calculator. This is educational material, not financial advice.

Worked examples

\$1,000 at 5 percent for 3 years

A balance of $1,000 earns simple interest at 5 percent a year for 3 years. What is the interest, and what is the total?

Interest is principal times rate times years: $1000 \times 0.05 \times 3 = 150$ , so $150.
Each year adds $1000 \times 0.05 = 50$ , so $50, because the rate never sees the interest already paid.
Total is principal plus interest: $1000 + 150 = 1150$ , so $1,150.

Interest is $150. The total is $1,150.

\$5,000 at 4 percent for 18 months

A loan of $5,000 charges simple interest at 4 percent a year. The term is 18 months. What is the interest?

Eighteen months is 1.5 years.
Interest: $5000 \times 0.04 \times 1.5 = 300$ , so $300.
Total: $5000 + 300 = 5300$ , so $5,300.

Interest is $300. The total is $5,300. Slicing the year into months did not change the product.

\$2,000 at 6 percent for 10 years

A $2,000 balance sits at 6 percent simple interest for 10 years. What is the interest?

Interest: $2000 \times 0.06 \times 10 = 1200$ , so $1,200.
Total: $2000 + 1200 = 3200$ , so $3,200.
That is a 60 percent add-on. Over a single year the same rate would have added $2000 \times 0.06 = 120$ , so $120, which is also what annual compounding would add in year one.

Interest is $1,200. The total is $3,200.

The mistake that costs the most

Treating a compounding product as if it were simple interest, or feeding a monthly rate into $Prt$ as if it were an annual one.

On the $2,000 example, 6 percent simple for 10 years is $1,200 of interest. If the account actually compounds annually, the add-on is larger, and the gap widens every extra year. Using this page on a compounding balance understates what you will owe or what you will have.

The other direction is a unit error. Five percent a month for a year is not $0.05 \times 1$ . Put the rate and the time in the same units first.

Common questions

Is this how a savings account works?

Almost never. A savings account that advertises a yield is compounding. Use this page when the contract really does charge or pay on the original principal only, or when a class wants the straight-line formula before compounding.

How do I enter 18 months?

As 1.5 years. Simple interest does not need a compounding frequency, so the only requirement is that the rate and the time share a unit. An annual rate with time in years is the pair this calculator is built for.

When do simple and compound interest match?

Over a single compounding period, and for as long as every period's interest is paid out and never joins the balance. Past that point they separate. The compare page walks through the same pair with percentages instead of a single stake.

Keep reading

This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.