Simple Interest Calculator · Practical guide
How to Calculate Simple Interest on a Loan
One formula — principal × rate × time — tells you exactly what a simple-interest loan costs.
At a glance
The Formula
Simple interest on a loan is I = P × r × t, where P is the amount borrowed, r is the annual rate as a decimal, and t is the time in years. The total you repay is the principal plus this interest.
Interactive tool
Simple Interest Calculator
Enter your own values, then compare the result with the examples below.
Simple Interest Results
Worked Example: A 3-Year Loan
Borrow $8,000 at 7% for 3 years: I = $8,000 × 0.07 × 3 = $1,680 in interest, so you repay $9,680 in total — about $269.44 per month spread evenly across 36 months.
Shorter Terms: Months and Days
Convert the term to a fraction of a year before multiplying. Months divide by 12 and days divide by 365:
- 6 months: $5,000 at 9% for 6 months → $5,000 × 0.09 × 0.5 = $225
- 90 days: $3,000 at 9% for 90 days → $3,000 × 0.09 × (90/365) = $66.58
Cost of $10,000 Borrowed for 2 Years
| Rate | Interest | Total Repaid |
|---|---|---|
| 5% | $1,000 | $11,000 |
| 8% | $1,600 | $11,600 |
| 12% | $2,400 | $12,400 |
| 18% | $3,600 | $13,600 |
Why Borrowers Benefit
Because simple interest never charges interest on interest, it costs less than a compounding loan at the same nominal rate. Paying early also saves you money, since interest stops accruing once the principal is returned.
Frequently Asked Questions
Is the rate entered as a percent or a decimal?
Enter it as a percent in the calculator (7 for 7%). In the formula itself, convert it to a decimal first: 7% becomes 0.07.
Do most auto loans use simple interest?
Many do. With a simple-interest auto loan, extra principal payments reduce future interest, so paying ahead can shorten the loan and cut total cost.
What happens if I pay a simple-interest loan off early?
You save the interest for the remaining time, since interest is only charged for the days or years the money was actually borrowed.
How is simple interest different from APR?
APR bundles fees and other loan costs into one yearly figure, so it is usually higher than the stated interest rate. Simple interest reflects only the rate times the balance.