Simple Interest Calculator

Simple interest is the version of interest that never grows a second head. One relation produces every number on this page: Interest = P × r × t, where P is the amount you start with, r is the annual rate written as a decimal, and t is time measured in years. Whatever interest accumulates sits to one side. It is never folded back into the balance that earns, so it never earns anything itself. That single omission is the entire difference between this page and the compound interest calculator, and over short periods it barely registers while over long ones it changes the answer completely.

The years and months inputs are converted into one number of years by counting total months and dividing by twelve, so nothing is rounded up to a whole year behind your back. Two years and seven months is treated as 2.583333 years, which on 10,000 at 8% produces 2,066.67 of interest rather than the 1,600 you would get from truncating to two years or the 2,400 you would get from rounding to three.

Interest that is the same size every single period

This is the defining property, and it is worth seeing in numbers rather than in the abstract. Take the values this page opens with: 10,000 at 8% for three years. The total interest is 2,400. That is 800 in the first year, 800 in the second, and 800 in the third. Broken down by month it is 66.67 every month, in month one and in month thirty six alike, and it would still be 66.67 in month four hundred. The balance therefore climbs in a straight line. If the growth chart on this page looks suspiciously like somebody drew it with a ruler, that is not a rendering fault, it is what simple interest looks like.

What the two tables are showing you

The accrued interest column is the running total, P × r × elapsed time, so it rises by the same step on every row. The balance column is your starting amount plus that running total. The interest column is the difference between one row and the row above it, which for a product like this is a constant. Seeing three identical columns of the same figure is a useful sanity check rather than a bug: the moment any of those steps starts growing, you are no longer looking at simple interest.

What this page deliberately refuses to do

The compounding frequency control is switched off, with the reason shown on the control itself. There is nothing to choose, because simple interest applies the rate once against the original amount for the whole term. Deposits and withdrawals are switched off too, and that decision needs more of an explanation. Adding money to a simple interest arrangement raises a question the formula cannot answer on its own, which is what date each new deposit starts accruing from and whether it accrues at the same rate as the original. Answering that properly means keeping a schedule, and once you are keeping a schedule you have built the machinery that the compound page already has. Rather than guess at the convention on your behalf, this page leaves it out and points you at the tool that handles it.

Tax, fees, early withdrawal penalties, and the possibility that the borrower does not pay you back are all outside the model. So is any change in the rate partway through. If your product resets its rate annually, run the calculation once per rate and add the pieces together.

Getting the model wrong costs more than getting the rate slightly wrong, so it is worth being specific about which real products behave this way. The honest summary is that simple interest describes a narrower set of arrangements than most people assume, and that the single most common reason somebody opens a page like this one, pricing a loan, is a case where the formula gives the wrong answer.

Arrangements that genuinely work this way

• Fixed deposits and certificates that pay interest out to a separate account rather than adding it back to the deposit.
• Bonds and notes whose coupons you spend as they arrive. The coupon is a fixed percentage of face value and does not grow because you held the bond longer.
• Bridging finance, invoice discounting, and other facilities priced on the number of days the money is outstanding.
• Many peer to peer and private lending agreements where interest is paid across monthly and not retained.
• Statutory interest on late commercial payments and on court awards, which is usually fixed by rule and explicitly not compounded.
• Back of an envelope estimates over a few months, where the compounding difference is smaller than your other assumptions.

A repayment loan is not simple interest, and the gap is large

This is the important one. On a normal repayment loan, every instalment pays off some of what you owe, and next month interest is charged on the smaller balance rather than on the amount you originally borrowed. The simple interest formula has no way to know that, so it charges you on the full amount for the whole term. Borrow 20,000 at 7% over five years and this page will tell you the interest is 7,000. The real amortising schedule charges 3,761.44 on a monthly payment of 396.02. The formula is not slightly high, it is high by a factor of 1.86.

The distortion shrinks as the term lengthens relative to how fast you repay, but it never becomes small. On a 300,000 mortgage at 6% over thirty years the true interest is 347,514.57 against the 540,000 that P × r × t predicts, still overstated by more than half. If you are pricing anything you repay in instalments, treat the number this page gives you as an upper bound that you will never actually pay.

The loans that really do charge on the original amount

There is a category where the formula is exactly right and that is precisely the problem. Some consumer loans, particularly at the smaller end of the market, compute the entire interest charge up front on the original amount, add it to the balance, and divide the total by the number of instalments. Borrow 10,000 at a quoted 6% over thirty six months and the interest is 1,800, giving payments of 327.78. This page will reproduce those figures to the cent, because that is genuinely how the loan is written.

What the quoted rate hides is that you are being charged on 10,000 in the final month even though you owe far less by then. Solve for the annual rate that a payment of 327.78 over thirty six months actually implies on 10,000 and it comes out at 11.08%, very nearly double the 6% on the paperwork. So if a lender quotes a rate and a total interest figure that matches P × r × t precisely, that is a signal rather than a coincidence, and the number to compare against other offers is the annual percentage rate rather than the headline.

Credit cards and overdrafts are compounded, usually daily

Revolving credit is quoted as an annual rate but almost always applied as a daily periodic rate, and yesterday's interest is part of today's balance. On a 3,000 balance at 22.9%, thirty days of simple interest is 56.47 while thirty days of daily compounding is 56.98. Half a pound or half a dollar, not worth arguing about. Leave the balance for a full year and simple interest says 687.00 while daily compounding says 771.76, and the rate you are truly paying is 25.73% rather than 22.9%. For any revolving balance you expect to carry, use the daily compound calculator instead of this one.

Savings that pay out rather than roll up

Here is the cleanest illustration of what simple interest costs you, because nothing changes except where the interest goes. Put 25,000 into an account paying 4.5% and have the interest paid monthly into your current account. You receive 93.75 a month, and across five years that is 5,625. Leave the interest sitting in the same account instead, so that it compounds monthly, and the same five years produce 6,294.90. The extra 669.90 is not the reward for a better rate, a longer term, or a different bank. It is the reward for not touching it.

People tend to ask which is better, which is the wrong shape of question. Compound interest is better for a saver and worse for a borrower, and the size of the difference depends almost entirely on time. Below is 10,000 at 6%, held either as simple interest or compounded monthly, at six horizons.

• After 1 year: 10,600.00 against 10,616.78, a difference of 16.78
• After 3 years: 11,800.00 against 11,966.81, a difference of 166.81
• After 5 years: 13,000.00 against 13,488.50, a difference of 488.50
• After 10 years: 16,000.00 against 18,193.97, a difference of 2,193.97
• After 20 years: 22,000.00 against 33,102.04, a difference of 11,102.04
• After 30 years: 28,000.00 against 60,225.75, a difference of 32,225.75

The first year gap is 16.78 on a balance of 10,000, which is 0.17%. That is why nobody argues about the distinction on a one year deposit, and why the argument becomes unavoidable on a pension. Compounded monthly, the balance takes until year nine to be 10% ahead of the simple version and until year twenty nine to be double it. Almost nothing happens for a decade and then everything happens at once, which is exactly the property that makes compounding hard to feel and easy to underestimate.

How long until the money doubles

Simple interest doubles when r × t equals 1, so the time to double is just 1 divided by the rate. At 6% that is 16.67 years, at 8% it is 12.5 years, and at 12% it is 8.33 years. These are exact rather than approximate, which is one of the few places simple interest is easier to reason about. The same 6% compounded monthly doubles in 11.58 years, five years sooner.

This is also where a familiar shortcut goes wrong. The rule of 72 says to divide 72 by the rate, which at 6% gives 12 years. That rule is derived from compound growth and it is a decent approximation there. Applied to a simple interest product it will make you nearly five years too optimistic, because it is answering a question about a different product.

The rate a simple product needs to keep up

A more useful comparison when you have two real offers in front of you: what rate does the account that pays out need in order to match the account that rolls up? Over ten years, 6% compounded annually grows a balance by 79.08% in total. To land in the same place with simple interest you would need 7.91%. So a deposit paying interest away at 7.5% still loses to one paying 6% and retaining it, over that horizon. Shorten the horizon and the required premium shrinks quickly, which is why the answer has to be worked out for your actual term rather than taken as a rule.

Short horizons where the distinction hardly matters

It is equally worth knowing when not to care. On 10,000 at 6%, one month of simple interest and one month of monthly compounding are both 50.00 to the cent. At three months it is 150.00 against 150.75. At six months, 300.00 against 303.78. At twelve months, 600.00 against 616.78. If you are pricing a ninety day note, your choice of interest model is not the largest source of error in the calculation. The day count convention almost certainly is, and that is the next section.

Day count conventions change the answer before the rate does

This page treats a year as a year and a month as exactly one twelfth of one. Money markets frequently do not. Under actual/365 you count the real days and divide by 365. Under 30/360 every month is treated as thirty days and every year as 360, which is why a 90 day period and a three month period give the same answer. Under actual/360 you count the real days but still divide by 360, and that combination quietly favours the lender.

The effect is easy to miss and easy to quantify. A rate of 6% applied on an actual/360 basis across a normal 365 day year pays 608.33 on 10,000 rather than 600.00, because you are being paid for 365 days at a rate defined per 360. That is the same as receiving 6.0833% on a 365 day basis, a premium of 1.39% of the interest. On 10,000 that is 8.33 and nobody notices. On 10 million it is 8,333 and somebody should. Check which basis a quote is written on before you compare it with another quote.

Inflation is where a flat return is most exposed

Prices compound even when your interest does not, and that asymmetry does most of the damage over a long hold. Put 10,000 into a simple interest arrangement paying 4% and hold it for ten years and you finish with 14,000. If inflation runs at 3% across the same decade, that 14,000 buys what 10,417.31 buys today. A decade of interest bought you 417.31 of real purchasing power, roughly 4% in total rather than the 40% on the statement.

The break even point for that arrangement is inflation of 3.42%. Above it you end the decade poorer in real terms while every statement along the way shows a gain. This is the single strongest argument against parking money in something that pays out and does not roll up, and it is worth testing with real numbers rather than assuming your rate is comfortably ahead. The compound interest calculator has an inflation field that restates a result in today's money and reports the real return using the exact Fisher relation rather than the subtraction most people reach for.

Tax, fees, and the things no calculator can see

Interest is generally taxed as income in the year it is credited, whether or not you withdraw it, so a headline figure of 2,400 might be 1,800 in your hand at a 25% marginal rate. Account fees, platform charges, and early withdrawal penalties come off the same figure. None of that is modelled here, and it is not modelled anywhere else on this site either, because the correct treatment depends on where you live and what wrapper the money sits in. Take the number from this page as the gross figure and apply your own deductions to it.

There is also the risk that the interest never arrives. The formula treats a government backed deposit and a loan to a stranger identically, because both are just P, r, and t. A rate that looks unusually generous is usually pricing something, and the calculator cannot tell you what.

Which calculator to use instead

If your interest is retained rather than paid away, use the compound interest calculator, which also handles deposits, withdrawals, contribution increases, and inflation. If interest is applied every day, as it is on most credit balances and revolving debt, use the daily compound calculator. If you are paying a fixed amount in every month, the SIP calculator is built around that pattern, and if you are drawing a fixed amount out, the SWP calculator models the drawdown and tells you when the balance runs out. For a trading account compounded per position, the forex compound calculator works in gains per trade rather than years.