Simple interest calculator
Work out the interest a principal earns without reinvestment, in years, months or days.
Calculator inputs
Results
Enter your values and press “Calculate” to see the result.
In short
- What it calculates
- Work out the interest a principal earns without reinvestment, in years, months or days.
- Formula used
I = P × r × t- Example
- £5,000 at 6% a year for 3 years:
Simple interest calculator
With simple interest the interest never joins the principal: every period earns exactly the same amount.
It is the usual formula for private loans, some promissory notes and short-term operations.
How it works
The principal is multiplied by the rate and by the time expressed in years. Months or days are converted first, using 12 months or 365 days per year.
Formula
I = P × r × t
Total = P + I
where t is in years (months ÷ 12, days ÷ 365)
Worked example
£5,000 at 6% a year for 3 years:
I = 5,000 × 0.06 × 3 = £900
Total = £5,900
Each year earns exactly £300.
Explanation
Where it is still used
It may look like a relic beside compound interest, but it remains current in many places: late payment interest on unpaid invoices, loans between individuals, some fixed-term deposits paying periodic coupons, and the statutory rates set by public authorities. When interest is withdrawn rather than reinvested, the result is exactly simple interest.
The gap widens over time
Over one year, simple and compound are barely distinguishable. Over five there is a noticeable gap, and over thirty the difference is enormous. At five per cent a year, a thousand becomes fifteen hundred under simple interest over ten years and about 1,630 under compound. Over thirty years, 2,500 against more than 4,300.
Late payment interest
Many legal systems set a late payment rate for overdue commercial payments, normally calculated as simple interest over the days of delay. Knowing the exact figure helps you claim on solid ground.
360-day or 365-day basis
Commercial transactions often calculate on a 360-day year, which gives a slightly higher daily rate. The contract should specify which applies.
Frequently asked questions
When is simple interest used?
In short operations, personal loans without compounding and some commercial discount products.
Why divide by 365 and not 360?
The calendar year is used. Some banking conventions use 360 days (commercial basis), which yields slightly more interest.
When is simple interest appropriate?
When interest is collected rather than reinvested: late payment interest, straightforward personal loans and deposits paying a periodic coupon.
How different is it from compound?
Little over short periods and a great deal over long ones. Over thirty years at five per cent, compound nearly doubles the simple result.
Need to calculate something else?
These tools are often used alongside this calculator.
Compound interest
See what your money becomes with regular contributions and reinvested interest.
Loan
Work out the monthly payment on a loan and how much interest you will pay.
Savings
How much you will accumulate by saving a fixed amount every month for several years.
Mortgage
Monthly payment, total interest and the cash you need upfront to buy a home.
Discount
Final price after a discount and exactly how much you save.
Investment
Future value of an investment and what it is really worth after inflation.