What is the simple interest formula?

I = P × r × t, where P is the principal, r the annual interest rate as a decimal and t the time in years. The total is A = P(1 + rt).

How do I calculate simple interest for months or days?

Convert the time to years: months ÷ 12, or days ÷ 365 (some lenders use 360).

How do I find the rate or the principal?

Rearrange: r = I ÷ (P × t) and P = I ÷ (r × t).

Is simple interest better than compound interest?

For a borrower, yes: you pay less. For a saver, compound interest earns more.

Simple Interest Formula I = Prt

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Simple Interest Calculator

Simple interest is charged or earned only on the original principal, never on interest that has already accumulated. The formula is I = P × r × t: principal times annual rate times time in years. The total amount repaid or received is A = P + I = P(1 + rt).

Formula

I = P × r × t A = P × (1 + r × t)

Where

I: interest earned or owed
P: principal
r: annual interest rate, as a decimal
t: time in years (months ÷ 12, days ÷ 365)
A: total amount = P + I

Calculator

Principal (P)

Annual rate (r) (%)

Time in years (t)

For 18 months enter 1.5.

Result and step-by-step solution

Simple interest

600.00

Total amount: 5,600.00. With annual compounding it would be 5,624.32.

Convert the rate
r = 4% = 0.04
Multiply
I = 5,000.00 × 0.04 × 3 = 600.00
Add to the principal
A = 5,000.00 + 600.00 = 5,600.00

How to use the formula

Simple interest is used for many short-term loans, some car loans, treasury bills priced on a discount basis, and interest between coupon dates on bonds (accrued interest). It is also the starting point of most maths courses because it grows in a straight line: every year adds the same amount of interest.

The time t must be in years. For 18 months enter 1.5; for 90 days enter 90 ÷ 365. In the example, 5,000 at 4% for 3 years earns 600 of interest for a total of 5,600. The calculator also shows what the same deposit would earn with annual compounding, 5,624.32, so you can see how quickly the two methods diverge. For the compound version, see the compound interest formula.

Frequently asked questions

What is the simple interest formula?: I = P × r × t, where P is the principal, r the annual interest rate as a decimal and t the time in years. The total is A = P(1 + rt).
How do I calculate simple interest for months or days?: Convert the time to years: months ÷ 12, or days ÷ 365 (some lenders use 360).
How do I find the rate or the principal?: Rearrange: r = I ÷ (P × t) and P = I ÷ (r × t).
Is simple interest better than compound interest?: For a borrower, yes: you pay less. For a saver, compound interest earns more.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.