Simple interest calculator
Simple interest is earned (or charged) only on the original principal. It does not compound: prior-period interest does not itself earn interest. Use it for short notes, quick linear estimates, teaching examples, and as a baseline before you model compound interest or real loan schedules.
With $10,000 at 5% annual for 2 years:
- Interest earned: $1,000
- Total amount: $11,000
- Average monthly interest: $41.67
- Average daily interest: $1.37
Formula: I = P × r × t → 10,000 × 0.05 × 2 = 1,000.
Can I calculate simple interest in pesos or quetzales?
Yes: keep the same currency for principal and result, without converting currency inside the formula. Check the rate’s period and the term’s unit. Simple interest is not the same as an amortized monthly repayment.
To estimate payments and fees, use the personal loan calculator. To convert GTQ and USD, open the quetzales to dollars converter.
Formula
I = P × r × t
where: P = principal r = annual rate as a decimal (5% → 0.05) t = time in years (months = n/12; days ≈ n/365) Total amount = P + I
Step-by-step example (defaults)
- Principal P = $10,000
- Rate r = 5% = 0.05
- Time t = 2 years
- Interest I = 10,000 × 0.05 × 2 = $1,000
- Total = 10,000 + 1,000 = $11,000
- Monthly interest ≈ 1,000 / 24 = $41.67; daily ≈ 1,000 / 730 = $1.37
Reference table (same engine rounding)
Amounts rounded to 2 decimals like the calculator. Enter your own numbers above for an exact case.
| Principal | Annual rate | Time (years) | Interest | Total amount | Interest / month | Interest / day |
|---|---|---|---|---|---|---|
| $10,000 | 5% | 2 | $1,000.00 | $11,000.00 | $41.67 | $1.37 |
| $10,000 | 12% | 1 | $1,200.00 | $11,200.00 | $100.00 | $3.29 |
| $5,000 | 18% | 0.5 (6 months) | $450.00 | $5,450.00 | $75.00 | $2.47 |
| $15,000 | 8% | 3 | $3,600.00 | $18,600.00 | $100.00 | $3.29 |
| $8,000 | 15% | 1.5 | $1,800.00 | $9,800.00 | $100.00 | $3.29 |
| $50,000 | 6% | 1 | $3,000.00 | $53,000.00 | $250.00 | $8.22 |
Simple vs compound (why it matters)
Same base $10,000 at 12% for 5 years:
| Method | Interest accrued | Ending balance | Gap vs simple |
|---|---|---|---|
| Simple | $6,000.00 | $16,000.00 | : |
| Compound (annual) | $7,623.43 | $17,623.43 | +$1,623.43 |
Over short horizons the gap is small; over several years compounding pulls ahead. For savings/investment growth use compound interest. For installment loan cost use a personal loan payment and an amortization schedule.
When is simple interest used?
- Short-term loans and promissory notes
- Rough late-fee / legal-interest estimates
- Classroom problems and linear “stated rate” comparisons
- Contrasting a non-compounding rate vs monthly card APR
Months and days
This calculator expects years (decimals allowed):
| Real period | Value in years |
|---|---|
| 6 months | 0.5 |
| 3 months | 0.25 |
| 18 months | 1.5 |
| 90 days | ≈ 0.2466 (90/365) |
| 1 year | 1 |
Example for 6 months: $5,000 × 18% × 0.5 = $450 (table row).
Common mistakes
- Treating an annual rate as a monthly rate (12% per year ≠ 12% per month)
- Applying simple interest to a product that compounds monthly
- Ignoring fees, insurance, and APR/APY when comparing offers
- Mixing currencies without converting principal
- Assuming “simple = cheaper” without checking term and true compounding
What this includes (and what it doesn’t)
Includes (educational model):
- I = P × r × t with annual r and t in years
- Total amount plus average monthly/daily interest over the term
- Reference scenarios in the table
May not match your contract:
- Daily/monthly compounding
- Origination fees, insurance, penalties
- Lender APR/APY disclosures
- 360-day commercial year conventions
- Amortizing principal with mixed payments
This tool is educational. It is not credit advice or a bank quote. Actual rates, compounding, and fees depend on your contract and issuer. Verify current terms before you borrow or invest.
FAQ
I = P × r × t. Multiply principal by the annual rate as a decimal and by time in years. Example: $10,000 × 0.05 × 2 = $1,000.
Simple always uses the original principal. Compound adds earned interest to the base so interest earns interest. At 12% for 5 years on $10,000, compounding adds about $1,623 more than simple (see table).
Convert months to years: months ÷ 12. Six months = 0.5 years, then apply I = P × r × t.
Only as a linear approximation. Cards usually compound monthly and add fees. To pay down a balance use the credit card payment or debt payoff calculators.
Here it is the average of total period interest divided by days in the term. Lenders may use 360/365 day counts or compound differently.
Compare payment and total cost with a personal loan calculator, check effective annual rate, and model extra payments with early loan payoff.