How do you calculate simple interest?

Multiply principal × decimal rate × years. Example: £4,000×0.09×1.5 = £540. Convert months (÷12) and days (÷365) to years first.

Simple vs compound interest?

Simple is linear (P·R·T); compound is exponential (P(1+r)^t). Short horizons differ little; over 20y at 7%, £10k is £24k simple vs £38.7k compound.

How do I convert months to years?

Divide by 12: 18 months = 1.5y, 6 months = 0.5y. For days, divide by 365 (or 360 for commercial-year contracts).

What is the doubling time for simple interest?

100 ÷ rate years. At 8% simple, ~12.5 years (vs ~9 years compound via Rule of 72).

Is simple interest ever better for borrowers?

Yes for short, early-repaid borrowing — no compounding penalty. For long-term saving, compounding wins decisively.

Financial · Free tool

Simple Interest Calculator

Linear interest on principal — loans, deposits and late fees.

Simple interest is the honest straight line of finance: interest charged only on the original principal, never on accumulated interest. Short-term personal loans between friends, auto-title advances, some bonds, late-payment penalties ('8% simple per annum'), and Year-7 maths homework all use it. This calculator returns interest, total repayable, and yearly interest for any principal, rate and time — with the unit discipline (years vs months vs days) that decides correctness.

The formula I = P × R × T looks trivial until time units mix. 9% for 18 months is T = 1.5 years, not 18; 60 days at 12% is T = 60/365 ≈ 0.164 years (or /360 for commercial-year loans — check the agreement). Because growth is linear, doubling time is simply 100 ÷ rate years (vs ~72 ÷ rate for compound), and early repayment saves pro-rata interest with no compounding sting.

Enter principal, annual rate, and years (decimals allowed: 0.5 = 6 months). Compare against our Compound Interest calculator to feel the exponential gap over long horizons.

Updated 2026-09-01 · 6-min read · Formula + steps included

● Simple workstation

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Simple-interest formula

I = P × R × T • Total = P + I • Yearly = I ÷ T

Principal times decimal rate times time in years. Rate must be annualised to match T: monthly rate × 12, daily × 365 (or 360 commercial). No exponent because interest never joins principal.

P: Original principal only. Accrued interest never earns more interest.
R: Annual rate as decimal (9% → 0.09).
T: Time in years. Months ÷ 12, days ÷ 365 (or 360 if contract says so).

Worked example: £4,000 at 9% for 18 months

Short-term loan between family members, documented properly:

Convert time: 18 months = 1.5 years.
Interest: 4,000 × 0.09 × 1.5 = £540.
Total: 4,000 + 540 = £4,540.
Yearly: 540 ÷ 1.5 = £360/year (which is 9% of £4,000 ✓).
Compound comparison: 4,000×1.09^1.5 ≈ £4,547 — only £7 more over 18 months, but the gap explodes over decades.

Result: Interest £540 — total £4,540 — £360 per year.

How to use this calculator

Three boxes, strict units.

Step 1: Enter principal

Amount borrowed or deposited. For staggered drawdowns, run each tranche separately.

Step 2: Enter annual rate

As % per year. Convert monthly quotes (×12) and daily penalties (×365) to annual first.

Step 3: Enter years

Decimals fine: 6 months = 0.5, 90 days ≈ 0.2466 (90÷365). Use commercial 360-day divisor only if stated.

Step 4: Read three lines

Interest, total, and yearly average — the figures to write into any loan note.

Use cases

Where simple interest is the legal or practical norm:

Family loans

£4k/9%/18m = £540 interest. Write P, R, T, day-count and signatures — HMRC and harmony both prefer paper.

Late-payment interest

UK statutory 8% over base (simple): £10k 60 days late ≈ £10k×0.08×60/365 ≈ £131.50 plus fixed compensation.

Auto & payday

Short advances quote simple-equivalent to look cheap; annualise to compare with amortising loans.

Deposits & bonds

Some fixed deposits pay simple yearly (no compounding until renewal). Reinvest promptly or lose growth.

Classroom

I=PRT teaches percentages, decimals and unit conversion in one problem — show yearly as the sanity check.

Pro tips

Precision habits:

Always write the day-count: 'actual/365' vs '30/360' moves 90-day interest by ~1.4%.
Annualise everything before comparing: 2% a month is 24% simple APR, not 'just 2%'.
For partial early repayment, interest stops on the repaid slice from that date — get a dated receipt.
Double-check with yearly: yearly must equal P×R exactly, or units are off.
Over 5+ years, demand compounding terms in writing — simple quotes can hide refinancing traps.