Simple Interest Calculator
Simple Interest Calculator — I = PRT
Simple interest is the most straightforward way to calculate the cost or return on a loan or investment. Our calculator applies the classic formula I = PRT to instantly give you the total interest earned (or owed) and the final maturity amount — with a monthly breakdown table.
The Simple Interest Formula
The formula is: I = P × R × T
- I = Interest earned or paid
- P = Principal (the starting amount)
- R = Annual interest rate (as a decimal; e.g., 6% = 0.06)
- T = Time in years
The total amount at maturity is simply A = P + I. Interest accrues proportionally to time — if you invest for 2 years, you earn exactly twice the interest of a 1-year period.
Simple Interest vs. Compound Interest
The key distinction is that with simple interest, the interest is calculated only on the original principal — it never earns interest on itself. With compound interest, interest is added to the principal periodically, and future interest is calculated on the growing total. Over short periods, the two methods produce similar results. Over long periods, compound interest generates significantly more.
Simple interest is commonly used for short-term loans, car loans in some markets, treasury bills, and savings bonds. It's also used in daily interest calculations for some bank accounts and personal loans.
Real-World Applications
- Personal loans: Banks often quote a flat annual percentage rate based on the principal.
- Fixed deposits (FDs): Many short-term FDs pay simple interest at maturity.
- Government bonds: Treasury bills and some bonds use simple interest for their discount pricing.
- Student loans: In some countries, interest during the grace period accrues as simple interest.