Simple Interest Calculator I = Prt

Simple interest does not include the effects of compounding where you earn interest on interest accumulated over time. Simple interest is calculated only once at the beginning of the investment or loan.

You can read more about the difference between simple vs. compound interest below.

How to Calculate Simple Interest

This calculator computes simple interest on savings given principal, rate and time. Using the formula I = Prt, multiply the investment principal by interest rate and time period.

For the formula I = Prt:

I = Interest amount
P = Principal amount
R = Rate of interest per year as a percent
r = Rate of interest per year as a decimal; r = R/100
t = Time

Input three known values of principal, simple interest, rate or time and the calculator finds the missing value.

To calculate the combined simple interest plus principal amount visit the CalculatorSoup® Simple Interest Plus Principal Calculator.

Simple Interest for Different Units of Time

If you are calculating simple interest on savings that will earn interest for some number of years, your interest rate is a yearly or annual rate and the calculation is I = Prt.

To calculate simple interest on an investment in monthly terms, this calculator converts your number of months into an equivalent number of years. For example, we would convert 9 months into a decimal number of years. Divide 9 by 12 months per year so 9/12 = 0.75 years. This way you can input the yearly interest rate in the calculator and we'll do the conversion for you.

To calculate simple interest on an investment with quarterly terms, this calculator converts your number of quarters into an equivalent number of years. For example, we would convert 2 quarters into a decimal number of years. Divide 2 by 4 quarters per year so 2/4 = 0.50 years. You should include the yearly interest rate in the calculator since we convert the time period into years for you.

To calculate simple interest on savings in terms of days, this calculator converts your number of days into an equivalent number of years. For example, we'd convert 511 days into a decimal equivalent of years. Divide 511 by 365 days per year, so 511/365 = 1.4 years. Please remember to input the yearly interest rate in the calculator.

Note that this simple interest calculator offers two options for days per year -- 360 and 365 -- if you want to calculate interest in terms of days. See the note below for time conversion factors used by this simple interest calculator.

Simple Interest vs. Compound Interest

You may be wondering, what is the difference between simple and compound interest? A loan, savings account or other investment earning simple interest means that the interest is calculated on only the principal using the formula I = Prt. Accumulated interest is not added back into the balance for subsequent interest calculations.

Loans like car loans and mortgages use the simple interest calculation to find interest owed. Student loans also typically charge simple interest and not compound interest. Like auto and home loans, total student loan interest charges are calculated at the beginning of the loan, and the interest owed is spread out over the course of paying back the loan.

A compounded interest calculation is the way most credit card companies figure interest charges. For example, if you do not pay your balance in full, a monthly interest charge is added to your unpaid balance. Compounding happens when the next month's interest charge is calculated on the new total including the unpaid balance plus the accumulated interest.

You can see that over time interest accumulates on top of principal plus interest much to the advantage of the credit card companies. But you can take advantage of the magic of compound interest with savings accounts or other interest-earning investments. In compound interest accounts the interest you earn is added to the existing balance which then earns additional interest.

You can read about and experiment with compound interest calculations at the CalculatorSoup® Compound Interest Calculator page.

Example Calculation: Simple Interest on a CD or Certificate of Deposit

To calculate simple interest on a CD you'll need to know the amount of money being invested in the CD, the interest rate, and the length of the CD term.

In this example the CD investment is 50,000. The annual or yearly interest rate is 4.5%, and the investment period 24 months.

Using the formula to find simple interest, I = Prt, multiply the three known values together.

First though, you'll need to do 2 things. One, remember to convert the interest rate as a percentage R to a decimal r by dividing 4.5 by 100 to get 0.045. Then, since you need the time period in years, convert 24 months into years by dividing by 12: 24 / 12 = 2. So 24 months is equal to 2 years.

I = Prt
I = 50,000 * 0.045 * 2
I = 4,500

So for a CD of $50,000 at a rate of 4.5% over 2 years, the calculation results in a simple interest amount of $4,500.

Simple Interest on Car Loans or Student Loans

The simple interest calculation is typically used for auto loans and student loans. You should not use this Simple Interest Calculator for these types of loans however.

Keep in mind that although the simple interest calculation is valid, once you start making payments on a loan, the loan balance decreases. So you should not owe the total amount of simple interest on the entire loan balance over the course of making loan payments.

For each month in the loan term, the simple interest calculation is repeated on the remaining loan balance. This is called amortization. An amortization schedule provides a list of each loan payment, and how much of each payment goes toward loan principal or interest.

You can experiment with the CalculatorSoup Amortization Calculator to see how a loan is amortized. You'll be able to see how with each payment, the amount of interest paid decreases over the course of the loan.

Simple Interest Formulas and Calculations:

This calculator for simple interest finds I, the simple interest where P is the principal amount of money to be invested at an interest rate R% per period for t number of time periods. Where r is in decimal form, r=R/100. r and t are in the same units of time.

Calculate simple interest, solve for I
- I = Prt
Calculate principal amount given simple interest, solve for P
- P = I / rt
Calculate rate of interest as a decimal given simple interest, solve for r
- r = I / Pt
Calculate rate of interest as a percent
- R = r * 100
Calculate time given simple interest, solve for t
- t = I / Pr

Time Conversion Factors Used in this Simple Interest Calculator

This calculator uses conversion factors that correspond to a typical 365-day year.

In simple interest calculations that involve months, we divide 365 by 12 to get the average of 30.4167 days per month.

For simple interst calculations involving quarters, we divide 365 by 4 to get 91.25 days per quarter.