Simple interest keeps the math straightforward, you earn or pay interest only on the original amount, nothing stacked on top. Enter your principal, rate, and time to see exactly what you'll owe or earn, with no compounding surprises.
This simple interest calculator applies the classic I = PRT formula to any principal, rate, and time combination. It supports multiple time units (days, months, years) and automatically converts to an annual rate for consistency. The output includes the interest amount (I), the total amount including principal (A = P + I), and a period-by-period interest breakdown so you can see how interest accrues over time. You can also use it in reverse: enter interest paid or earned and solve for principal, rate, or time. The calculator works for both borrowing scenarios (how much will this short-term loan cost?) and saving scenarios (how much will I earn on this balance?).
1. Enter the principal (P) โ the starting loan amount or deposit balance.
2. Enter the annual interest rate (R) as a percentage.
3. Enter the time period (T) and select units: days, months, or years.
4. The calculator instantly returns the interest (I), total amount (A = P + I), and a breakdown by period.
5. To solve for a missing variable, leave it blank and enter the known interest amount โ the calculator fills in the unknown.
6. Toggle to Daily Simple Interest mode for auto loans or mortgages that accrue interest daily on the outstanding balance.
Simple interest uses one of the cleanest formulas in finance:
I = P ร R ร T
Where I = interest, P = principal, R = annual interest rate (as a decimal), and T = time in years. Total amount owed or earned: A = P + I = P(1 + RT). For example: $8,000 principal at 5.5% for 3 years gives I = $8,000 ร 0.055 ร 3 = $1,320. Total = $9,320. For daily simple interest, the daily rate = R รท 365, and each day's interest accrues on the current outstanding balance.
The most important thing about simple interest is what it doesn't do: it doesn't compound. Interest accrues only on the original principal, not on previously accrued interest. This makes simple interest cheaper for the borrower (compared to compound interest at the same rate) and less rewarding for the saver. Understanding this distinction helps you spot when a financial product is more or less expensive than it appears.
For short time periods and small balances, the difference between simple and compound interest is barely noticeable. But over longer periods, compounding creates a dramatic gap. On a $10,000 investment at 6% for 1 year: simple interest earns $600 exactly. Compound interest monthly earns $616.78 โ a $16.78 difference. Over 10 years: simple interest totals $16,000 (adding $6,000). Compound interest monthly totals $18,193.97 โ that's $2,194 more, or 36% more total interest, on the same rate and principal.
For borrowers, this cuts both ways. A true simple interest loan charges less total interest than a compounding loan at the same rate. But "simple interest" on a 6-year auto loan can still mean paying $6,000โ$8,000 in total interest โ the daily accrual adds up. For savers, compound interest is always more powerful. If you're choosing between a simple interest CD and a compound-interest CD at the same quoted rate, the compound option yields more โ always compare APY (which standardizes for compounding) rather than nominal rates.
Most auto loans in the US are structured as daily simple interest (DSI) loans, not the amortizing-schedule loans that many borrowers assume. Here's how DSI works: interest accrues every calendar day on the outstanding principal balance. When you make a payment, it first covers the accrued interest to date, and the remainder reduces principal. Pay early: less interest accrues, more goes to principal. Pay late: more interest accrues, less principal is reduced โ and your payoff date extends.
This has a practical implication: making your auto payment a few days early every month genuinely saves you money. On a $22,000 auto loan at 7.5% DSI, paying 5 days early every month saves roughly $180 over 60 months โ not a fortune, but real. The flip side: a 15-day late payment on a $22,000 balance at 7.5% generates about $68 in extra interest before you even pay. Late fees on top of that can make a bad month significantly more expensive.
Not all simple interest loans are created equal. A subset of lenders โ particularly in the subprime auto and some installment loan markets โ still use a Rule of 78 or "precomputed interest" structure, which front-loads more interest into early payments and penalizes early payoff. Under the Rule of 78, if you pay off a 12-month loan in month 6, you've only "earned" 57 of the 78 interest units (sum of digits 1โ12), not the 50% you'd expect.
The Truth in Lending Act prohibits prepayment penalties on most mortgages and significantly limits them for other loan types, but precomputed interest is still legal in some states for certain short-term loans. Always ask your lender whether your loan accrues as daily simple interest or uses precomputed interest. If you plan to pay off early, the answer matters โ DSI rewards early payoff; precomputed interest doesn't.
The starting balance. Interest scales linearly โ double the principal, double the interest at the same rate and time.
Annual interest rate. A 1% difference on $15,000 over 3 years equals $450 in total interest โ worth shopping for.
Measured in years for the standard formula. Shorter terms mean less total interest even at higher rates.
Paying early reduces the daily balance; paying late increases accrued interest before your payment is applied.
DSI vs. precomputed interest affects your effective rate if you pay off early.
Dominique in Tucson needs a $4,500 bridge loan for 8 months at a simple interest rate of 9.0% per year. I = $4,500 ร 0.09 ร (8/12) = $270. Total repayment: $4,770. Monthly payment: $596.25. Because this is simple (non-compound) interest, the total is exactly predictable from day one โ no surprises. Compare to a compound interest personal loan at the same 9% rate over 8 months: the difference is about $6. Short terms make simple vs. compound largely academic.
Greg holds $25,000 in a 91-day T-bill priced to yield 4.85% (simple interest, bank discount basis). Interest for the period: $25,000 ร 0.0485 ร (91/365) = $303.36. Total at maturity: $25,303.36. Using the simple interest calculator's savings mode with P = $25,000, R = 4.85%, T = 91 days confirms the result instantly. For context, short-term Treasury yields in 2026 are tracking in the 4.0โ4.5% range as the Fed maintains its current rate posture.
1. Convert time to years before calculating by hand. The formula uses years. 6 months = 0.5 years; 90 days = 90/365 = 0.2466 years. The calculator handles this automatically.
2. Use daily simple interest mode for auto loans. Most US auto loans accrue interest daily โ switch to DSI mode for the most accurate accrual modeling.
3. Ask your lender explicitly: daily simple interest or precomputed? The distinction matters if you pay off early.
4. Compare APY for savings products, not just the quoted rate. APY accounts for compounding frequency; simple interest products have APY = stated rate.
5. Don't confuse simple interest with flat-rate loans. Some products (especially overseas) quote a "flat rate" that applies to original principal for the full term โ these are effectively much higher APRs than they appear.
Simple interest = Principal ร Rate ร Time, or I = PRT. The total amount (principal + interest) is A = P(1 + RT). Rate is the annual decimal (e.g., 6% = 0.06) and time is in years.
Simple interest accrues only on the original principal. Compound interest accrues on the principal plus any previously earned interest. Over long periods, compound interest grows much faster.
Most US auto loans are daily simple interest (DSI) loans โ interest accrues daily on the outstanding balance. Making payments early saves interest; paying late costs extra.
Most savings accounts and money market accounts use compound interest, compounded daily or monthly. Treasury bills and some short-term instruments use simple interest. APY standardizes the comparison.
Daily simple interest means interest accrues each calendar day on the current outstanding principal balance. The daily rate is the annual rate divided by 365. Most auto loans and some personal loans use this structure.
Yes. Enter the known values and leave the unknown field blank. The calculator solves for the missing variable automatically.
For a single-period loan with no fees, simple interest rate equals APR. For multi-payment loans, the APR is calculated using the IRR method on all cash flows, which may differ from the simple interest rate. For mortgages and complex loans, use the APR Calculator.
The Rule of 78 is a method of allocating interest payments that front-loads more interest into early payments. It penalizes early payoff compared to daily simple interest. It's still used in some installment loan markets despite restrictions under federal lending law.
Brief disclaimer: This calculator provides estimates for educational and planning purposes only. Actual interest calculations, loan structures, and accrual methods depend on your specific loan agreement, lender practices, and applicable state and federal regulations. Results should be treated as planning guidance rather than financial or legal advice.