A simple interest calculator that works out the interest and total amount on a deposit or loan using the classic I = P × r × t formula. Ideal for short-term loans, bridging finance, bonds and any product where interest is charged only on the original principal rather than compounding.
How it works
The calculation is the textbook simple-interest formula:
I = P × r × t
where P is the principal, r is the annual rate as a decimal (your percentage ÷ 100) and t is the time in years. Months are converted to a fraction of a year (t = years + months ⁄ 12). The total amount is simply P + I. Because the interest is always based on the original principal — never on interest already added — the amount earned each year stays constant.
Example calculations
Put £1,000 at 5% for 3 years:
- Interest: £1,000 × 0.05 × 3 = £150
- Total amount: £1,150
Over the same 3 years, compound interest at 5% would yield about £158 — the gap widens sharply over longer terms, which is why compound interest matters much more for a 20-year mortgage than for a 6-month bridging loan.
| Principal | Rate | Time | Interest | Total |
|---|---|---|---|---|
| £1,000 | 5% | 1y | £50 | £1,050 |
| £1,000 | 5% | 3y | £150 | £1,150 |
| £5,000 | 8% | 2y 6m | £1,000 | £6,000 |
| £10,000 | 3.5% | 5y | £1,750 | £11,750 |
When simple interest is actually used
Simple interest is not just a textbook concept. It appears in real financial products more often than most people realise:
Bridging loans — short-term property finance where the interest is calculated on the original loan and either rolled up (paid at redemption) or charged monthly. Because the term is short (typically a few months to two years), the compounding effect on a simple-rate product is modest.
Hire purchase and some car finance — in a flat-rate hire purchase agreement, the interest charge is calculated on the original amount borrowed for the full term, then divided into equal monthly payments. This is effectively simple interest. The nominal flat rate translates to a significantly higher APR because the outstanding balance falls each month while interest is still charged on the full original amount.
Some savings bonds — fixed-term savings products sometimes pay simple interest, particularly short-dated government savings certificates or fixed deposits where the interest is paid annually rather than reinvested.
Informal and personal loans — where two parties agree on a flat interest charge for a set period without compounding.
Rearranging the formula
If you know three of the four values, you can solve for the fourth:
I = P × r × t (interest)
P = I / (r × t) (principal)
r = I / (P × t) (annual rate as decimal)
t = I / (P × r) (time in years)For example, if a lender charges £200 interest on a £2,000 loan for 2 years, the implied rate is 200 / (2000 × 2) = 0.05 = 5% per year.
Simple vs compound: a quick comparison
The longer the term, the more compound interest overtakes simple interest for the same rate. For a 12-month loan they are almost identical; for a 10-year savings account the difference is substantial. Use this calculator when you specifically know a product uses simple interest; for mortgages, most savings accounts, and credit cards, use a compound interest calculator instead.
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