Work out simple interest on a deposit or loan for any number of years, months or days, and see how it compares with compound interest at the same rate
Enter the principal (the amount deposited or borrowed), the annual interest rate and the time in years, months or days. The calculator applies I = P × r × t and shows the interest, the total, the interest per year, month and day, and what the same rate would earn if it compounded once a year.
Interest = principal × annual rate × time in years. $10,000 at 5% for 3 years is $10,000 × 0.05 × 3 = $1,500, for a total of $11,500. For months divide by 12; for days divide by 365 (some lenders use 360, which gives slightly more interest). $10,000 at 5% for 90 days is $10,000 × 0.05 × 90 ÷ 365 = $123.29. Rearranged, the same formula finds any missing value: rate = I ÷ (P × t), principal = I ÷ (r × t) and time = I ÷ (P × r).
Simple interest is paid only on the original principal. Compound interest is also paid on interest already earned, so it pulls ahead the longer the money is left. The table uses $10,000 at 5%, with the compound column compounding once a year.
| Time | Simple interest | Compound interest | Difference |
|---|---|---|---|
| 1 year | $500 | $500 | $0 |
| 2 years | $1,000 | $1,025 | $25 |
| 3 years | $1,500 | $1,576.25 | $76.25 |
| 5 years | $2,500 | $2,762.82 | $262.82 |
| 10 years | $5,000 | $6,288.95 | $1,288.95 |
Many auto loans and personal loans charge simple interest on the balance outstanding each day, so paying early or extra cuts the interest. Bond coupons pay a fixed percentage of face value, which is simple interest on that face value. Savings accounts and CDs usually compound, which is why banks quote an APY under Regulation DD. For money left to grow, use the compound interest calculator.
I = P × r × t: principal × annual rate (as a decimal) × time in years. $10,000 at 5% for 3 years is $1,500.
Divide the days by 365 to get years: $10,000 at 5% for 90 days = 10,000 × 0.05 × 90 ÷ 365 = $123.29. Some lenders divide by 360, which raises the interest slightly.
Rate = interest ÷ (principal × years). $1,500 of interest on $10,000 over 3 years is 1,500 ÷ 30,000 = 0.05, or 5% a year.
When you borrow, simple interest costs less than compound interest at the same rate. When you save, compound interest earns more because interest earns interest.
Principal × annual rate ÷ 12. $10,000 at 5% is $41.67 a month.
Tax rules, limits and pay data change. Check the current figures with the primary source before acting on them.