$1,000 at 5% for 3 years
- Input
- Principal = $1,000, Rate = 5% per year, Time = 3 years
- Working
- Interest = P × R × T = 1,000 × 0.05 × 3 = $150. Total = 1,000 + 150 = $1,150.
- Result
- Interest = $150; total amount = $1,150
Simple Interest Calculator
Calculate simple interest with I = PRT, see the balance year by year, and compare it honestly against compound interest on the same money over the same period. Runs entirely in your browser — your numbers never leave this device.
Final total
$1,150.00
$1,000.00 at 5% simple interest for 3 years earns $150.00. Interest is calculated only on the original principal — it does not compound.
- Principal
- $1,000.00
- Interest earned
- $150.00
- Final total
- $1,150.00
| Year | Interest so far | Balance |
|---|---|---|
| 1 | $50.00 | $1,050.00 |
| 2 | $100.00 | $1,100.00 |
| 3 | $150.00 | $1,150.00 |
How it works
Interest = P × R × T, where P = principal, R = annual rate as a decimal, T = time in years | Total amount = P + Interest = P × (1 + R × T)
| Year | Interest that year | Total interest | Balance |
|---|---|---|---|
| 1 | $50.00 | $50.00 | $1,050.00 |
| 2 | $50.00 | $100.00 | $1,100.00 |
| 3 | $50.00 | $150.00 | $1,150.00 |
| 4 | $50.00 | $200.00 | $1,200.00 |
| 5 | $50.00 | $250.00 | $1,250.00 |
Simple interest is the most transparent form of interest: it is always calculated on the original principal and nothing else. Borrow or deposit $1,000 at 5% and the interest is $50 in the first year, $50 in the second year and $50 in every year after — the calculator shows this as a year table so the constant yearly amount is impossible to miss. The total after any number of years is one multiplication and one addition.
That flatness is both the strength and the limit of simple interest. It is easy to check by hand and still genuinely used for some short-term loans, car title and informal lending, treasury calculations and exam questions. But over longer periods it falls behind compound interest, where interest itself starts earning interest. The third worked example puts the two side by side on identical money so the difference is a number, not a slogan.
Time must be in years for the standard formula. For months, use the fraction of a year (6 months = 0.5 years); for days, divide the days by 365. The calculator accepts the time directly in years and the year table counts whole years from the start date you have in mind.
Worked examples
$2,500 at 4% for 5 years
- Input
- Principal = $2,500, Rate = 4% per year, Time = 5 years
- Working
- Interest = 2,500 × 0.04 × 5 = $500. That is $100 per year, the same every year, because the principal the rate applies to never changes. Total = 2,500 + 500 = $3,000.
- Result
- Interest = $500; total amount = $3,000
Simple vs compound on $5,000 at 6% for 2 years
- Input
- Principal = $5,000, Rate = 6% per year, Time = 2 years
- Working
- Simple: interest = 5,000 × 0.06 × 2 = $600, total $5,600. Compound (annual): 5,000 × (1.06)^2 = $5,618, interest $618. The $18 difference is exactly one year's interest on the first year's $300 of interest: 300 × 0.06 = $18.
- Result
- Simple total = $5,600; compound total = $5,618 — compounding is ahead by $18 after just 2 years
Frequently asked questions
Where is simple interest actually used?
Short-term and informal lending, some auto and consumer loans, certain government and treasury calculations, and a great deal of school mathematics. Most savings accounts and credit cards use compound interest instead, which is why comparing the two on the same figures — as the third example does — is worth doing before assuming a quoted rate means what you think it means.
Why does compound interest pull ahead over time?
Under simple interest the base never changes: $1,000 at 5% always earns $50 a year. Under compounding, year one's interest joins the base, so year two earns interest on $1,050, year three on $1,102.50, and so on. The lead starts tiny ($18 after 2 years on $5,000 at 6%) and grows with the rate and the number of years.
How do I use months instead of years in I = PRT?
Convert the time to years: months divided by 12. Six months is T = 0.5, so $1,000 at 5% for 6 months earns 1,000 × 0.05 × 0.5 = $25. For days, some conventions divide by 360 and others by 365 — check which your lender uses, because it changes the answer slightly.
Can I solve for the rate or time instead of the interest?
Yes — the formula rearranges. Rate R = Interest / (P × T), and time T = Interest / (P × R). If $1,000 earned $150 over 3 years, R = 150 / (1,000 × 3) = 0.05, a 5% rate. The calculator focuses on interest and total, but the working lines show the substituted formula so the rearrangements are easy to follow.
Is simple interest better for borrowers or lenders?
For the borrower, on the same rate and term, because the interest never snowballs: a loan at simple interest costs less than the same loan compounded. For the saver or lender the reverse holds. That is precisely why the type of interest matters as much as the headline rate when comparing offers.
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