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    Loans / Simple interest

    Simple interest calculator

    Interest on the original principal only, with no compounding. Enter a rate and a term in years and months, and see the interest, the total, the daily accrual and what the same rate would earn if it compounded.

    Principal$10,000Term2.00 yrBasisSimple
    Interest
    $1,200
    6.00% simple
    Total repaid
    $11,200
    2.00 years
    Interest per day
    $1.64
    360/365-day basis
    Effective annual
    6.00%
    Interest over principal per year
    Interest by year
    Simple interest is linear: the same amount every year.
    Interest by year
    YearOpening balanceInterestClosing balance
    1$10,000$600.00$10,600
    2$10,000$600.00$10,600

    With simple interest the balance does not grow, so the interest never compounds.

    Inspect the model
    Choose a quick result view, a scaled comparison, or the complete diagnostic set.
    Simple against compound
    The gap is the interest that simple interest never earns.
    Simple against compound$0$4.0k$8.0k$12.0k$16.0k$20.1kY0Y0Y1Y1Y2Y2Y3Y3Y4Y4Y5Y5Y6Y6Y7Y7Y8Y8Y9Y9Y10Y10SimpleCompound
    Canonical equations
    The exact relationships implemented by this engine.

    I = P · r · t · t in years; months are divided by twelve.

    A = P + I · No compounding, so the balance is linear.

    I_day = P · r / 365 · The convention most promissory notes use.

    finance methodology

    A clear path from inputs to results.

    Simple interest is charged on the original principal only, so the balance grows in a straight line. It is still used on short-term notes, some dealer-arranged car finance and legal judgments — and it is the fastest way to see what compounding is actually worth.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Enter the principal, the annual rate and the term.
    2. Read the interest, the total and the daily accrual.
    3. Compare the simple line with the compound curve to see what compounding adds.

    The formula

    I=P⋅r⋅t,A=P+II = P \cdot r \cdot t, \qquad A = P + I

    Reference: Simple interest with months converted to years (Broverman, Mathematics of Investment and Credit).

    Worked example

    $10,000 at 6% for 18 months

    Inputs
    • P = 10,000, r = 0.06, t = 1.5 years.
    Calculation path
    1. 1

      I = 10,000 × 0.06 × 1.5 = 900. A = 10,900.

    Result

    $900 of interest, $10,900 total.

    Interpreting the result

    The gap between the simple and compound lines is the interest that simple interest never earns. At 6% over ten years that is about a third of the total.

    Assumptions & limitations

    • No compounding at any frequency.
    • Rate is constant for the whole term.
    • No fees or day-count conventions beyond a 365-day year.

    Frequently asked questions

    Is simple interest ever cheaper?

    Yes, for the borrower: if you pay the interest periodically, simple interest avoids charging interest on interest.

    Why does my loan not match?

    Most consumer loans amortise monthly, which compounds. Use the loan payment calculator for those.

    What day-count do promissory notes use?

    Often 360 days for commercial paper and 365 for consumer notes; the difference is small but real.

    Does the total change if I pay early?

    With simple interest, yes — the interest stops accruing on the repaid principal.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.