Our free simple interest calculator instantly computes the interest earned on any loan or savings account using the standard formula I = P x R x T. Enter your principal, rate, and time to see your interest breakdown and total balance in seconds.
Total Interest Earned:
Total Balance:
Enter values and click Calculate to see chart
How to Use This Tool
Enter the principal amount (the starting sum of money you are investing or borrowing).
Type in the annual interest rate as a percentage (for example, enter 5 for 5%).
Input the time period in years for your investment or loan.
Click Calculate to see your interest earned and total balance.
The Formula
The calculation uses the standard simple interest formula: I = (P x R x T) / 100 where P is the principal amount, R is the annual interest rate (in percent), and T is the time period in years. Unlike compound interest, simple interest is calculated only on the original principal, so your earnings grow at a steady, predictable rate.
Why It Matters
You lent a friend $10,000 for 3 years at 5% simple interest to help them out. At the end, they will repay $11,500 total. Use this to quickly calculate fair interest for informal loans between friends or family members where compound interest would be too complex.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal amount, so the interest earned each period stays the same. Compound interest is calculated on both the principal and any previously accumulated interest, so your earnings accelerate over time. For example, $10,000 at 5% simple interest for 3 years earns $1,500 total, while the same amount at 5% compounded annually earns $1,576. Compound interest significantly outperforms over longer time horizons.
How is interest calculated on a daily basis?
Daily interest calculation divides the annual rate by 365 (or 360, depending on the bank) to get a daily rate, then multiplies that by the current balance. Most savings accounts and credit cards use daily calculations. For a $10,000 savings account at 5% APR, the daily interest is about $1.37. Over a 30-day month, this accumulates to roughly $41.09. Daily calculations matter most for accounts where the balance changes frequently, since each day's interest is computed on that day's actual balance.
What is the difference between APR and APY?
APR (Annual Percentage Rate) represents the simple annual interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding and shows the actual annual return you will earn. The difference grows with more frequent compounding: a 6% APR compounded monthly yields an APY of 6.17%, while the same rate compounded daily yields 6.18%. When comparing savings accounts, always look at APY to see the true return. For loans, APR gives a clearer picture of borrowing costs.
How do I calculate interest earned on a savings account?
For simple interest savings, multiply your principal by the annual rate and the time in years: I = P x R x T. Most modern savings accounts use compound interest, so the formula is A = P(1 + r/n)^(n×t) where n is the compounding frequency. If your account compounds monthly at 4% APY, your effective monthly rate is 0.327%. High-yield savings accounts currently offer 4-5% APY, which means $10,000 earns about $400-$500 per year without any risk.
What is a good interest rate for savings?
A good savings rate significantly exceeds the national average offered by traditional banks (often 0.01%). High-yield savings accounts currently offer 4-5% APY, which is considered competitive. Certificates of deposit (CDs) may offer 4-6% for locked-in terms. Anything below 2% erodes in real purchasing power given inflation, which averages 2-3%. Shop around among online banks and credit unions, as they typically offer much better rates than brick-and-mortar banks due to lower overhead costs.