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Simple Interest Formula and Worked Examples

Learn simple interest for loans and deposits with principal, yearly rate, time and straightforward examples.

Published October 18, 2026

Simple Interest Formula and Worked Examples

Learn simple interest for loans and deposits with principal, yearly rate, time and straightforward examples. Use the free RapidCalc calculator to check your own numbers and explore different inputs.

What simple interest means

Simple interest applies the stated rate to the original principal, rather than adding previous interest to the interest-bearing amount. It is useful for illustrating uncomplicated deposits and loans.

Formula and units

Interest = principal × annual percentage rate × years ÷ 100. Rate must be expressed as a percentage per year; for months, divide the number of months by 12.

Worked example

For $10,000 principal at 5% simple annual interest over three years: $10,000 × 5 × 3 ÷ 100 = $1,500 interest. Total principal plus interest is $11,500.

Comparing two durations

At the same $10,000 principal and 5% annual rate, one year earns $500 while two years earn $1,000. The increase is linear because interest does not compound.

Cautions with real loans

A lender may use daily accrual, amortization, fees, or a different day-count convention. Check the contract rather than assuming a stated APR is always simple interest.

Try your own example

Open the interactive calculator and change one number at a time to see the effect. Read the assumptions attached to the result before applying it to a real transaction.

Educational information only; product rules, tax rates and financial terms vary.

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