Simple Interest Calculator — I = P × r × t

Real-world use cases

• Price a 90-day short-term loan to a friend

  You're lending $1,000 to a friend for 90 days and want to charge a fair, transparent rate rather than guessing. Set the rate to 5%, switch the unit to Days, enter 90, and read the interest: about $12.33. Because simple interest doesn't compound, the math is honest and the friend can verify it themselves — there's no hidden snowball. Share the URL so both of you are literally looking at the same calculation.

• Check the yield on a Treasury bill

  T-bills are quoted on a simple-interest, days-to-maturity basis. Enter the face value as principal, the annualized discount rate, switch the unit to Days, and enter the days to maturity. The interest figure is what you'll actually earn at maturity, and the total is your redemption value. Compare it against a savings account by clicking through to the compound tool — for anything under a year the difference is usually rounding noise.

• Compute statutory late-payment penalty on an overdue invoice

  An invoice for $2,000 is 30 days overdue and the contract specifies 18% annual simple interest on late payments. Enter 2000, set the rate to 18, switch to Days, enter 30, and the tool returns roughly $29.59 in penalty interest. That's the defensible number to add to the reminder — simple interest is the standard for statutory and contractual late fees precisely because it's easy to audit.

• Teach I = P × r × t in a finance class

  The worked-formula line under every result spells out I = principal × rate × time with the actual numbers substituted, so students can trace the arithmetic instead of trusting a black box. Have them solve for interest first, then flip the solve target to rate or time and watch the same formula invert to P = I/(r·t). The simple-vs-compound panel then motivates the next lesson without you drawing two graphs.

• Decide simple vs compound before signing

  A lender offers a loan; the contract says "simple interest." Plug in the principal, rate, and term to see the true cost, then read the compare panel to learn how much MORE you'd pay if it were compounded annually instead. For a borrower, simple is cheaper — confirming the contract is in your favor. For a saver being offered a "simple interest" product, the same gap tells you exactly what you're giving up versus compounding.

Common pitfalls

• Entering a monthly rate in the rate field while leaving the unit on Years. The rate field is always the ANNUAL rate. If the loan is quoted at 1.5% per month, enter 18 (the annual equivalent) and set the time unit to Months — don't enter 1.5 with Years.

• Assuming a savings account or mortgage uses simple interest. Almost all deposit accounts and home loans compound. Use this tool for genuinely simple-interest instruments (most car loans, T-bills, short-term notes, penalties); for everything else click through to the compound calculator or you'll under- or over-state the real number.

• Mixing day-count conventions. This tool normalizes days as days ÷ 365. Some contracts use a 360-day year (banker's year) or actual/actual. For a precise legal or accounting figure, check which convention the contract specifies — the difference on a 30-day penalty is small but real.

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