Simple Interest Calculator

Simple interest is charged only on the original principal: interest = principal × rate × years ÷ 100. The calculator shows that interest and the total amount (principal plus interest). With the defaults, $10,000 at 6% for 5 years earns $3,000, for a total of $13,000.

Two assumptions sit behind that figure. The full principal is outstanding for the whole period, and interest is never added to the balance to earn interest of its own. If the same $10,000 compounded yearly at 6%, the compound interest calculator would show $13,382.26, which is $382.26 more. The gap widens with longer periods and higher rates.

The period is in years, so convert shorter terms first:

• Months: divide by 12. Eighteen months is 1.5; one month is 0.0833.
• Days: divide by 365, or by 360 if your agreement uses a 360-day year. Check which one it uses.

For a 90-day loan of $8,000 at 7%, enter 90 ÷ 365, about 0.2466 years, and the interest is about $138.10. On a 360-day basis the same loan costs $8,000 × 7% × 90 ÷ 360 = $140.00. The field steps in quarter years, but you can type any decimal.

A one-month term is also the quickest way to see monthly interest: $100,000 at 6% for 0.0833 years is about $500 a month.

Rearrange the same formula when you know the interest and need one of the other inputs:

rate = interest ÷ (principal × years) × 100

years = interest ÷ (principal × rate ÷ 100)

If a $10,000 private loan between friends is to be repaid as $11,200 after 2 years, the $1,200 of interest is a rate of 1,200 ÷ (10,000 × 2) × 100 = 6% a year. At 6%, $900 of interest on $10,000 takes 900 ÷ 600 = 1.5 years. Enter $10,000, 6% and 1.5 years to confirm: the calculator shows $900.

Some lenders quote a "flat" rate on an instalment loan and work out the interest exactly as this calculator does, on the full amount for the full term. $10,000 at 6% flat over 5 years means $3,000 of interest and 60 payments of $216.67.

But you repay part of the principal every month, so on average you owe only about half of it. Measured on the reducing balance, as most loan rates are, those payments work out to about 10.85% a year. A genuine 6% reducing-balance loan over the same 5 years would cost $193.33 a month and $1,599.68 of interest, which you can check in the personal loan calculator.

So if a quote gives a flat rate, use this calculator to see the total interest, and compare offers by APR or by total repaid, never by the flat rate alone.