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Simple Interest Calculator

Calculate interest on savings or loans using the simple interest formula — I = P × r × t. Find the interest earned, the rate, or how long until you reach a target.

SIMPLE INTEREST CALCULATOR

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Step-by-step solution

I = P × r × t

Simple Interest Calculator Explained

Core concepts, classroom applications, and plain-English explanations for all audiences.

When would you actually use this?

You borrow £8,000 for a car at 6% per year, simple interest, over 3 years. The dealer tells you the total repayment is £9,440. How do they get that? Simple interest: I = £8,000 × 0.06 × 3 = £1,440. Total = £8,000 + £1,440. That's it. No tricks. Simple interest is the clearest way to understand what borrowing costs before compound interest complicates things.

Worked example

"You put £2,500 in a fixed-rate bond at 3.5% per year for 18 months. How much interest do you earn?"

Convert time: 18 months ÷ 12 = 1.5 years

I = P × r × t

I = £2,500 × 0.035 × 1.5

Result: £131.25 interest

Total: £2,500 + £131.25 = £2,631.25

Key step: always convert months to years by dividing by 12 before using the formula.

Where simple interest appears in real life

  • → Hire purchase agreements: buying a sofa or appliance on finance — the interest on the original price, not the growing balance.
  • → Fixed-rate savings bonds: some accounts advertise a flat return — "earn £150 on £3,000 over 2 years" — that's simple interest.
  • → Personal loans: many short-term personal loans quote a flat interest figure — simpler to understand than APR-based compound calculations.

Simple vs compound — the key difference

Simple interest: same amount earned every year (I = Prt). Compound interest: each year's interest gets added to the balance, earning more next year. Over 10 years, compound wins — but simple is the foundation you must master first.

Good to know

Understanding simple interest

What is simple interest?
Simple interest is calculated only on the original principal — the amount never changes as a base. Each period earns exactly the same amount of interest, making it straightforward to calculate and predict.
I = P × r × t
I = Interest earned
P = Principal (starting amount)
r = Rate per year (as decimal)
t = Time in years
Where is simple interest used?
Simple interest is used for short-term personal loans, hire purchase agreements, some savings bonds, and car finance. Most bank savings accounts use compound interest — but knowing simple interest helps you compare deals and spot when something is more expensive than it looks.
Car loan: £8,000 at 6% for 3 years
Interest: £8,000 × 0.06 × 3 = £1,440
Total repaid: £9,440
Pro-rata: partial years
Interest is proportional to time. 6 months = 0.5 years, 3 months = 0.25 years. Just divide the number of months by 12 to convert to the decimal you need for the formula. This also works in days: divide days by 365.
9 months = 9 ÷ 12 = 0.75 years
£1,000 × 5% × 0.75 = £37.50
73 days = 73 ÷ 365 = 0.2 years
Simple vs compound: the difference grows
With simple interest, you earn the same amount every year. With compound interest, you earn interest on your interest too — so the amount grows faster over time. The longer the period, the bigger the gap between the two.
£1,000 at 5% for 10 years:
Simple: £1,000 + £500 = £1,500
Compound: £1,000 × 1.05^10 = £1,629
Difference: £129 from compounding