How much
interest?

About the simple interest calculator

This calculator works with the four quantities of simple interest — principal, annual rate, time and the interest itself — and lets you solve for whichever one you are missing. Simple interest is the easiest kind to understand: it is always calculated on the original amount you started with, called the principal, and never on interest that has already been added. It is the method used for many short-term loans, car finance and some savings bonds.

How to use it

Pick what you want to find with the “Solve for” menu, then fill in the rest. To find interest, enter a principal, an annual rate and a number of years — $10,000 at 5% for 5 years earns $2,500, for a final balance of $12,500. To go the other way, choose Rate or Time and enter the interest you are aiming for: the calculator rearranges the formula to tell you the rate or the number of years you need. The balance chart below always shows how the money grows year by year.

The formula

Simple interest uses one short formula, $I = P \cdot r \cdot t$, where $P$ is the principal, $r$ is the yearly rate written as a decimal (5% becomes 0.05) and $t$ is the number of years. Because the terms are just multiplied together, the formula rearranges cleanly: $P = \frac{I}{r\,t}$, $r = \frac{I}{P\,t}$ and $t = \frac{I}{P\,r}$. The final balance is the principal plus the interest, $P(1 + r\,t)$.

Where it is used

Simple interest shows up whenever interest is not reinvested. Many car loans, personal loans and store-financing deals quote simple interest, as do short-term savings certificates and government bonds that pay a flat coupon. Being able to solve for the rate or the time is useful when you know the return you want and need to work backwards — for example, how long a deposit must sit, or what rate would double a fixed amount of interest. For longer horizons, compare it with compound interest.