The simple interest formula
Formula
Interest = principal × yearly rate × time in years.
Example
10,000 at 5% for 3 years: 10,000 × 0.05 × 3 = 1,500, total 11,500.
By days
Time = days ÷ 365 (or 360 at some banks). 90 days on 10,000 at 5%: 123.29.
Where simple interest is used
Short deposits: Some short-term deposits pay simple interest on the number of days.
Comparison: Simple interest is always less than compound interest at the same rate over more than one period.
360-day year: A 360-day basis gives slightly more interest per day than 365.
Flat-rate loans: A flat profit rate works the same way: amount × rate × years. See the Loan Calculator.
FAQ
What is the simple interest formula?
I = P × r × t: principal times yearly rate times time in years.
How do I calculate simple interest by days?
Divide the days by 365 to get years, then multiply. Choose “days” and we do it for you.
What is the monthly interest?
The yearly interest divided by 12: 10,000 at 5% earns 500 a year, 41.67 a month.