Simple Interest Calculator – Instant I = P×r×t Results

Enter Your Values

Principal ($)

Annual Rate (%)

Time (Years)

Interest Earned

$750

Total Amount

$5,750

Monthly Interest

$21

// The Formula

I = P × r × t

A = P + I — Total Amount = Principal + Interest

P

Principal

The starting amount you invest or borrow

r

Rate

Annual interest rate expressed as a decimal

t

Time

Duration in years over which interest accrues

I

Interest

The result — interest earned or charged

Worked Example

$5,000 at 5% for 3 years

I = 5,000 × 0.05 × 3 = $750 interest. Total returned: $5,750. Monthly yield: $20.83. No hidden compounding — every penny is predictable from the start.

// What it is

Understanding Simple Interest

Simple interest is calculated only on the original principal — never on previously accumulated interest. The result is perfectly linear and verifiable by hand. It's the fairest structure for short-term borrowing and is used across personal loans, car finance, and fixed-term deposits worldwide.

The contrast with compound interest becomes stark over time. At 5% on $10,000: after 3 years simple = $1,500 vs. compound = $1,576 (small difference). After 30 years: simple = $15,000 vs. compound = $33,219. For short-term loans, simple interest is fairer. For long-term savings, always seek compound.

Always verify whether a lender quotes a flat rate or APR. A 10% flat rate equals roughly 18–20% reducing-balance APR. APR is the legally standardised comparison metric in the US, UK, and EU.

// Where it applies

Global Context

🇺🇸 US — Auto & Personal Loans

Most US car loans and personal loans use simple interest. A $10,000 loan at 6% APR over 4 years = exactly $2,400 total interest. Fully transparent, predictable from day one.

🇬🇧 UK — Cash ISAs & Fixed Bonds

UK fixed-rate savings accounts and Cash ISAs advertise AER on simple interest. A £5,000 ISA at 4.5% earns £225/year — FSCS-protected, zero compounding surprises.

� AU / CA — Term Deposits & GICs

Australian term deposits and Canadian GICs (Guaranteed Investment Certificates) use simple interest. A $10,000 GIC at 4.5% for 1 year = exactly $450 earned — no reinvestment complexity.

// Common Questions

Frequently Asked Questions

Simple interest is calculated only on the original principal. Formula: I = P × r × t. Used for short-term loans, car loans, and basic savings accounts.

I = P × r × t, where r = rate as decimal and t = years. Total = P + I. Example: £5,000 at 4% for 3 years → I = £600, total = £5,600.

Simple interest grows linearly — same amount every period. Compound interest grows exponentially because interest is added to the principal and earns further interest.

Short-term personal loans, car finance, some bonds, and fixed deposits. Mortgages and long-term investments almost always use compound interest.

APR (Annual Percentage Rate) includes interest plus all fees, expressed annually. Always compare APRs — it's the legally standardised metric in the US, UK, and EU.

Under simple interest, yes: I = P×r×t, so doubling t doubles I. Under compound interest the growth is faster and non-linear. Shorter loan terms always save money.

Flat-rate calculates interest on the full original principal throughout the loan. Reducing-balance charges only on the outstanding amount. A 10% flat rate equals roughly 18–20% APR reducing-balance.

// Methodology & References

Formula & Calculation Method

Simple Interest

I = P × r × t

I — Interest earned or charged
P — Principal — starting amount
r — Annual interest rate as a decimal
t — Time in years

Source: US auto-loan and personal-loan standard (Truth in Lending Act, Regulation Z)

Total Amount

A = P + I = P(1 + r·t)

A — Total amount returned (principal + interest)

Authoritative Sources & Standards

CFPB: Regulation Z (Truth in Lending Act) mandates disclosure of APR — the legally standardized simple-interest comparison metric for US consumer loans. → CFPB

Expert Insights & Research

A 10% flat rate on a personal loan equals approximately 18–20% reducing-balance APR. Always compare APR, not flat rates — a common trap in consumer lending.

— FCA Consumer Credit sourcebook (UK) / CFPB TILA guidance (US) (2024)

// Explore More

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