Simple Interest Calculator - Loan & Deposit Interest

Every loan hides the same formula

Simple interest is the most transparent way to calculate the cost of borrowing or the return on lending. One formula covers it all: I = P x r x t, where P is principal, r is annual rate, and t is time in years. Unlike compound interest, simple interest never adds earned interest back to the principal - the base stays flat, and the cost grows in a straight line. Personal loans between individuals, late payment penalties, and short-term deposits typically use this method.

Quick start

You lend a friend $10,000 at 5% annual interest for 6 months (180 days).
Interest: $246.58 | Total to repay: $10,246.58 | Per month: $41.10 | Per day: $1.37

How to calculate simple interest - step by step

Principal ($) - enter the original amount lent, borrowed, or deposited. For personal loans, this is the sum transferred. For invoices, use the gross value.
Annual interest rate (%) - the yearly percentage. Personal loans typically range from 3% to 10%. Savings accounts currently offer 1-5%.
Period - enter the duration as a number and select the unit: days, months, or years. The calculator converts using the banking standard: 1 month = 30 days, 1 year = 365 days.
Read the results - total interest earned or owed, monthly and daily breakdown, a cumulative table (for periods over 90 days), and the full formula with your values plugged in.

Simple interest formula reference

Variable	Meaning	Example
I	Interest earned or owed	$246.58
P	Principal (original amount)	$10,000
r	Annual interest rate (decimal)	0.05 (5%)
t	Time in years	0.4932 (180/365)

Simple vs compound interest - side by side

Feature	Simple interest	Compound interest
Base for calculation	Original principal only	Principal + accumulated interest
Growth pattern	Linear	Exponential
$10,000 at 5% for 1 year	$500.00	$511.62 (monthly)
$10,000 at 5% for 5 years	$2,500.00	$2,833.59 (monthly)
$10,000 at 5% for 10 years	$5,000.00	$6,470.09 (monthly)
Common use	Personal loans, penalties	Bank deposits, mortgages

Practical examples

Example 1 - personal loan to a friend
Principal: $5,000, Rate: 4%, Period: 12 months (360 days).
Interest: $197.26 | Total repayment: $5,197.26 | Per month: $16.44

Example 2 - overdue invoice penalty
Invoice: $2,500, Rate: 11.25% (statutory late interest), Period: 45 days.
Interest: $34.67 | Total owed: $2,534.67 | Per day: $0.77

Example 3 - short-term savings
Deposit: $20,000, Rate: 3.5%, Period: 90 days.
Interest earned: $172.60 | Balance after 90 days: $20,172.60

Example 4 - large business loan
Principal: $100,000, Rate: 7%, Period: 2 years (730 days).
Interest: $14,000.00 | Total: $114,000.00 | Per month: $583.33

Example 5 - minimal interest check
Principal: $1,000, Rate: 2%, Period: 30 days.
Interest: $1.64 | Total: $1,001.64 | Per day: $0.05

FAQ

What is simple interest and when is it used?

Simple interest is interest calculated only on the original principal, without adding earned interest back to the base. It is commonly used for personal loans between individuals, late payment penalties on invoices, short-term deposits, car title loans, and some government bonds. The formula is I = P x r x t, where P is principal, r is annual rate as a decimal, and t is time in years.

How does the calculator convert months and years to days?

The calculator uses the banking standard: 1 month = 30 days and 1 year = 365 days. This means 6 months equals 180 days, not 182.5. This convention is used in most financial contracts and legal calculations. The slight difference from calendar months is negligible for most practical purposes.

Why does simple interest matter if banks use compound?

Banks typically use compound interest, but simple interest still applies in many real-world scenarios: private loans between friends or family, penalty interest on overdue payments, some auto loans with flat-rate interest, treasury bills, and zero-coupon bonds. For periods under 1 year, simple and compound interest produce nearly identical results. The gap becomes significant only over multiple years.

How much interest does $10,000 earn at 5% for one year?

With simple interest: $10,000 x 0.05 x 1 = $500.00. With monthly compound interest it would be $511.62 - a difference of just $11.62 over a full year. For shorter periods the gap is even smaller: at 6 months, simple gives $246.58 vs compound $253.13 - only $6.55 apart.

Can I use this for late payment interest?

Yes. Enter the overdue amount as principal, the statutory or contractual late payment rate as the annual rate, and the number of days past the due date as the period. The calculator will show exactly how much penalty interest has accrued. Most jurisdictions set statutory late payment rates that change periodically - check your local regulations for the current rate.

What is the difference between nominal and effective interest rate?

The nominal rate is the stated annual percentage. The effective rate accounts for compounding frequency. With simple interest, the nominal and effective rates are identical because there is no compounding - interest is calculated once on the original amount. This is one reason simple interest is easier to understand and compare: 5% means exactly 5%, with no hidden compounding effects.

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Ready-made calculations

The most searched variants of this calculator. Each link opens it with the value filled in and the result calculated.