How to use
- Choose what to find: interest, principal, rate or time.
- Enter the other values. The rate can be per year or per month.
- Pick the time unit: years, months or days. For days, choose a 365- or 360-day year.
- See the result, the total and the interest per year, month and day.
Simple interest formula
I = P × r × t Total = P + I
- P is the principal: the amount borrowed or saved.
- r is the yearly rate as a decimal (5% = 0.05).
- t is the time in years: months ÷ 12, or days ÷ 365.
To solve for another value, rearrange it: P = I ÷ (r × t), r = I ÷ (P × t), t = I ÷ (P × r).
Examples
- $10,000 at 5% for 3 years: 10,000 × 0.05 × 3 = $1,500, so the total is $11,500.
- $5,600 at 11.75% for 45 days: 5,600 × 0.1175 × 45 ÷ 365 = $81.12. With a 360-day year it is $82.25.
- Rate needed: $1,500 of interest on $10,000 over 3 years is 1,500 ÷ (10,000 × 3) = 5% a year.
Simple vs compound interest
$10,000 at 5% a year:
| Years | Simple interest | Compounded yearly |
|---|---|---|
| 1 | $10,500.00 | $10,500.00 |
| 5 | $12,500.00 | $12,762.82 |
| 10 | $15,000.00 | $16,288.95 |
| 20 | $20,000.00 | $26,532.98 |
| 30 | $25,000.00 | $43,219.42 |
Simple interest grows in a straight line. Compound interest also earns interest on past interest, so the gap widens.
365 or 360 days?
Most textbooks and savings accounts count days as a fraction of a 365-day year. Some lenders use a 360-day “bankers’ year”, which makes each day’s interest slightly larger. Leap years are ignored either way.
Loan documents sometimes round interest up to the next cent, so results can differ by a cent.
Interest that compounds? Use the compound interest calculator.