Free interest calculator
Calculate how much interest you'll earn or pay — enter principal, rate, and time to get simple interest, compound interest, and APY, updated live, as you type.
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Results are estimates. Consult a professional.
How the interest calculator works
This interest calculator computes the interest earned or charged on a sum of money using the simple interest method. Simple interest is calculated on the original principal only — there is no compounding. The result is the amount of interest accrued, and the total amount (principal plus interest) at the end of the term.
Simple interest is the foundation of consumer lending disclosures. The Truth in Lending Act (TILA) requires lenders to express the cost of credit in a standardised way, and simple interest underpins the APR calculation that appears on every consumer loan offer. Understanding it helps you compare loan costs and evaluate savings offers accurately.
Worked example: $8,000 at 5% simple interest for 2 years
Casey deposits $8,000 in a savings account paying 5% simple interest annually. After 2 years, the account earns $800 in interest, bringing the total to $8,800. Because interest is simple, year 1 and year 2 each produce exactly $400 — there is no acceleration.
Interest earned on common balances and rates
The table shows the interest earned (not the total balance) for five common principal amounts at three rates over one, two, three, and five years using simple interest.
| Principal | Rate | 1 year | 2 years | 3 years | 5 years |
|---|---|---|---|---|---|
| $1,000 | 4% | $40 | $80 | $120 | $200 |
| $1,000 | 6% | $60 | $120 | $180 | $300 |
| $1,000 | 8% | $80 | $160 | $240 | $400 |
| $3,000 | 4% | $120 | $240 | $360 | $600 |
| $3,000 | 6% | $180 | $360 | $540 | $900 |
| $3,000 | 8% | $240 | $480 | $720 | $1,200 |
| $5,000 | 4% | $200 | $400 | $600 | $1,000 |
| $5,000 | 6% | $300 | $600 | $900 | $1,500 |
| $5,000 | 8% | $400 | $800 | $1,200 | $2,000 |
| $10,000 | 4% | $400 | $800 | $1,200 | $2,000 |
| $10,000 | 6% | $600 | $1,200 | $1,800 | $3,000 |
| $10,000 | 8% | $800 | $1,600 | $2,400 | $4,000 |
| $25,000 | 4% | $1,000 | $2,000 | $3,000 | $5,000 |
| $25,000 | 6% | $1,500 | $3,000 | $4,500 | $7,500 |
| $25,000 | 8% | $2,000 | $4,000 | $6,000 | $10,000 |
Interest only (I = P × r × t). Principal is unchanged throughout. Source: Federal Reserve consumer finance reference methodology.
Tips for using this interest calculator
Simple interest is more transparent than compound interest, but a few practical points help you apply it correctly in real situations.
- Convert sub-year terms before calculating — a 6-month loan uses t = 0.5, not 6. Forgetting to divide months by 12 overstates the interest by a factor of 12.
- Check whether your lender uses simple or compound interest — credit cards always compound; many personal and auto loans use simple interest. The difference matters more at higher balances and longer terms.
- Use this calculator to verify APR disclosures — if a lender quotes a dollar amount of interest over a term, you can back-calculate the implied rate: r = I ÷ (P × t). If it differs from the stated APR, ask why.
- Understand that early repayment saves more on simple-interest loans — because interest accrues linearly on the outstanding principal, each early payment reduces the base for all future interest charges immediately.
- Compare total interest, not monthly payments — a lower monthly payment achieved by extending the term often means more total interest paid. The quick-ref table makes this visible: a 5-year term charges more than 2× the interest of a 2-year term.
Accuracy and limitations
This calculator applies the standard simple interest formula I = P × r × t. It assumes a fixed rate and constant principal for the entire term. It does not model compounding, fees, taxes, early repayment, or amortisation (where each payment reduces the principal and therefore the next period's interest). For compound interest projections, use the compound interest calculator.
Results are for educational and planning purposes only and do not constitute financial advice. Always verify interest terms with your lender or financial institution.
Interest terms defined
About this interest calculator
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