The simple interest formula
Simple interest multiplies three things: the principal, the annual rate as a decimal, and the time in years. Unlike compound interest, the interest earned or charged does not itself earn interest, so the amount is the same every year. Time in months is divided by 12 and time in days by 365 before multiplying.
Worked example (pre-filled). $10,000 at 5% for 18 months: I = 10,000 × 0.05 × 1.5 = $750.00, so the total repaid or received is $10,750.00. The charge is $500.00 a year, $41.67 a month, $1.37 a day.
Where you meet simple interest: promissory notes and some short-term loans, the daily interest on a simple-interest auto loan (most US car loans accrue this way between payments, which is why paying early saves a little), and penalty or late-payment interest. Savings accounts and credit cards compound instead; the compound interest calculator shows the difference, which grows with time and rate. This page computes; it does not recommend a loan, lender, investment or tax position.
Formula and assumptions
total = P + I
- A 365-day year is used for days; some lenders use 360.
- No compounding, fees or payments during the term.
Frequently asked questions
What is the simple interest on $10,000 at 5% for 18 months?
$750. 10,000 × 0.05 × 1.5 years = 750, so the total is $10,750.
What is the difference between simple and compound interest?
Simple interest is charged only on the original principal. Compound interest is charged on principal plus previously accrued interest, so it grows faster over time.
How do I calculate simple interest per day?
Multiply the principal by the annual rate and divide by 365. $10,000 at 5% is $1.37 a day.
Do car loans use simple interest?
Most US auto loans are simple-interest loans: interest accrues daily on the outstanding balance, and each payment covers accrued interest first.
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- Savings goal calculator: Monthly deposit needed to reach a target by a date, with interest
- Georgia paycheck calculator: take-home pay after federal, FICA and Georgia tax
- Salary to hourly conversion
Sources
This calculator gives general estimates from the figures you enter. It is not tax, legal, payroll or financial advice. See our disclaimer.