Simple Interest Calculator

About Simple Interest Calculator

Simple interest is calculated only on the principal, not on accumulated interest. I = Prt.

How to use this calculator

1. Enter the principal amount, which is the starting money.
2. Enter the annual interest rate as a decimal or percent, depending on the calculator input.
3. Enter the time period in years, or convert months and days to years first.
4. Read the interest amount, then add it to the principal if you want the total balance.

The formula explained

The formula \(I = P \times r \times t\) computes simple interest, where \(I\) is the interest earned or owed, \(P\) is the principal, \(r\) is the annual rate, and \(t\) is the time in years.

• I = simple interest
• P = principal, the original amount of money
• r = annual interest rate written as a decimal
• t = time in years

Step by step method

1. Write down the principal, rate, and time in years.
2. Multiply the principal by the rate.
3. Multiply that result by the time to get the simple interest.

Worked example

Problem. A loan of $2,000 has a simple interest rate of 6% per year for 3 years. How much interest is owed?

1. Convert the rate to a decimal, so \(r = 0.06\).
2. Use \(I = P \times r \times t\): \(I = 2000 \times 0.06 \times 3\).
3. Calculate \(I = 360\).

Tips and common mistakes

• Make sure the time is in years. For example, 6 months is \(0.5\) years.
• Do not confuse simple interest with compound interest, because simple interest does not earn interest on previous interest.

Frequently asked questions