Updated · Built and checked by the PlinzoTools team, formulas tested against published sources
Calculate linear, non-compounding interest from principal, rate, and time.
Unlike compound interest, simple interest is calculated only on the original principal every period -- it never earns interest on previously accrued interest. This is a genuinely different, linear growth formula, still used for some short-term loans, certain bonds, and basic interest calculations.
Enter your principal, annual interest rate, and time in years.
Interest = Principal × Rate × Time
Total Value = Principal + Interest
At the same rate, simple interest always produces less total interest than compound interest over any period longer than one compounding cycle, since compound interest lets earlier interest start earning its own interest -- see the Compound Interest Calculator to compare.
The formula uses time in years, so shorter periods need converting. A hypothetical $2,500 loan at 4% for 18 months is 1.5 years, so interest is 2,500 x 0.04 x 1.5 = $150 and the total due is $2,650. A 90-day note is 90 divided by 365, or about 0.2466 years; some lenders use a 360-day year instead, which gives a slightly different figure, so check how your agreement counts days. If the calculator asks for years, enter decimals like 1.5 rather than the number of months.
At 5%, a $1,000 principal earns exactly $50 each year under simple interest. Under annual compounding, the second year earns interest on $1,050, so the gap grows every year and becomes significant over long horizons. That is why the same nominal rate can mean very different outcomes over 3 years and over 30. When you see a quoted rate, it is worth asking whether it is simple or compounded.
Simple interest is often used in short-term arrangements such as some personal notes, certain bonds' coupon math and some auto loans that accrue interest daily on the outstanding balance. For a real contract, read the terms or ask the lender how interest is calculated, and for legal questions about a loan agreement talk to a qualified professional.
After calculating, divide the interest by the principal and by the years; you should get back the rate you entered. If you do not, one of the inputs was probably entered in the wrong unit, such as months instead of years. This simple check catches most input errors before you rely on the figure in a note or agreement.
Some short-term loans, certain bonds, and basic promissory notes use simple interest -- most savings accounts, credit cards, and mortgages use compound interest instead.
Yes for growth (lower total return than compounding at the same rate), but it can be beneficial for a borrower, since simple-interest loans generally cost less in total interest than an equivalent compound-interest loan.
Divide the number of days by 365 (or 360 if your agreement uses that convention) and enter the result as the time in years.
This calculator assumes the whole principal stays outstanding for the entire time. A loan with partial payments needs a separate calculation on the declining balance.
Because the interest added each year is the same fixed amount, so a graph of value over time is a straight line rather than a curve.
Reference: Social Security Administration