Simple interest, and why it stays flat
Simple interest is charged on the original principal and nothing else. It never earns interest on interest, so the amount owed grows in a straight line: the same figure every year, for as many years as the arrangement runs. That is the whole difference from compound interest, and it is the reason simple interest is the borrower's friend and the saver's disappointment.
Because the growth is linear, the arithmetic stays predictable in a way compound interest does not. Double the time and you exactly double the interest. Double the rate and the same thing happens. There is no curve to account for and no compounding frequency to argue about.
Using this simple interest calculator
Enter the principal, the annual rate, and the time. The results show the total payoff, the interest on its own, and an approximate monthly figure — useful for seeing what a loan actually costs month to month rather than as one lump at the end.
Two settings live in the customize panel. Time in switches the time field between years, months and days, so a 90-day note does not have to be converted to a fraction of a year by hand. Day-count basis only matters when you are working in days, and it is the setting people do not expect: a 365-day year is the exact calculation, while the 360-day “banker's rule” is a convention still used in parts of commercial lending. The rate is annual in both cases.
The formula, worked through
Simple interest is I = P × r × t — principal times the annual rate as a decimal, times the time in years.
₹10,000 at 5% for 3 years is 10,000 × 0.05 × 3 = 1,500 in interest, for a total payoff of 11,500. Compare that with compound interest at the same rate and term, which would come to about 1,576 — not a dramatic gap over three years, but the two diverge sharply as the term lengthens.
For a period in days, the time term becomes days ÷ 365 (or ÷ 360 on the banker's basis). ₹10,000 at 5% for 90 days is 10,000 × 0.05 × (90 ÷ 365) = 123.29 on the exact basis, or 125.00 on the 360-day one. The 360-day convention produces slightly more interest for the same period, which is why it survived: it is worth knowing which basis a lender is quoting.
Where simple interest is actually used
It is less common than compound interest, but it is not a textbook curiosity. Car loans and many personal instalment loans are simple-interest products, short-term promissory notes and bridging finance usually are, and so is most late-payment interest on invoices. Bonds pay simple interest on their face value between coupon dates.
Where it is not used is savings, deposits and almost anything described as an investment — those compound, and using this page for them will understate the outcome. One more thing worth flagging: an instalment loan quoted at a simple-interest rate is not the same as one quoted at an APR, because with each payment the balance falls and the interest with it. This page assumes the principal stays put for the whole term, so use it for a single lump repaid at the end rather than for an amortising schedule.
For growth that earns on its own earnings, use the compound interest calculator.
FAQ
How do I calculate interest for a number of days?
Open the customize panel and set Time in to days, then enter the day count. The calculator converts it using the day-count basis you have selected: days ÷ 365 for the exact basis, or days ÷ 360 for the banker's rule.
The rate stays annual either way — that is the part people get wrong. A 5% annual rate over 90 days is not 5% of the principal; it is roughly a quarter of that, because 90 days is roughly a quarter of a year.
Is a car loan simple interest?
Usually yes, in the sense that interest accrues on the outstanding principal rather than compounding on itself. That is why paying a car loan early, or paying a little extra each month, genuinely reduces the total interest — the interest stops accruing on the part you have paid off.
But an amortising car loan is not quite what this page models. Here the principal is assumed to sit unchanged for the whole term, which fits a single lump-sum repayment. On a loan with monthly instalments the balance falls each month, so the real total interest is lower than this calculator's figure.
What is simple interest, and how is it calculated?
Simple interest is calculated only on the original principal — never on interest already earned:
P = principal, r = annual rate (decimal), t = time in years.
Simple interest vs. compound interest — what's the difference?
Simple interest always applies to the original principal, so it grows in a straight line. Compound interest is recalculated on the growing balance, so it grows exponentially and outpaces simple interest over time:
($10,000 at 6%, for both.) Simple interest is common on car loans, short-term personal loans, and many bonds and T-bills; compound interest is standard for savings accounts, credit cards, and mortgages. See our Compound Interest Calculator to compare the two on your own numbers.
What's the difference between a 365-day and 360-day year for interest?
A 365-day ("exact") count divides the annual rate across the real number of days in a year. A 360-day count — the "banker's rule," or actual/360 — treats every year as twelve 30-day months for simpler math, a convention still common in commercial and syndicated lending. Because 360 is a smaller divisor than 365, the same nominal rate produces slightly more interest per real day elapsed:
| Basis | Daily rate factor | 90-day interest on $10,000 @ 5% |
|---|---|---|
| 365-day (exact) | 5% ÷ 365 | $123.29 |
| 360-day (banker's rule) | 5% ÷ 360 | $125.00 |
On a large loan over many days, that gap is real money — it's worth checking which basis a lender is quoting. Switch "Day-count basis" in the customize panel when entering time in days.
Where is simple interest actually used?
It's less common for revolving debt like credit cards or for long-horizon savings and mortgages, which almost always compound instead.
Explore other calculators
Financial
Compound Interest Calculator
Project how savings or investments grow with compound interest — including monthly contributions and yearly, half-yearly, or quarterly compounding.
Financial
Tip Calculator
Work out the tip, total, and per-person split for any bill in real time.
Design
Aspect Ratio Calculator
Find a ratio from pixel dimensions, or resize without distortion.