Evidence-based guide
Simple Interest Calculations and Accumulation Conventions
Simple interest measures the return on an investment or cost of a loan where interest is calculated solely on the initial principal deposit.
Simple Interest Calculator
Simple Interest Calculator
Calculate basic interest accrual with custom calendar conventions
$
%
Accrued Interest
$1800.00
Ending Total Balance
$11800.00
Days Elapsed
1,095 days
Years Equivalent
3.0000 yrs
Balance Growth Curve Over Time
| Period | Interest Earned | Accumulated Balance |
|---|---|---|
| Year 1.0 | $600.00 | $10600.00 |
| Year 2.0 | $1200.00 | $11200.00 |
| Year 3.0 | $1800.00 | $11800.00 |
Calculate simple interest: I = P × R × T.
Formula and calculation methods
Interest (I) = Principal (P) × Rate (R) × Time (T)
Exact Interest (365-day)
Uses a standard 365-day calendar year for daily calculations. This is standard in most consumer banking.
Ordinary Interest (360-day)
Assumes twelve 30-day months (360 days/year). Historically used by financial institutions to simplify arithmetic.
Date Range Mode
Computes interest over specific start/end dates using selected day-count conventions.
How to interpret your result
Simple interest grows linearly, unlike compound interest which grows exponentially. It is commonly used for short-term loans, auto loans, and simple savings certificates.
Limitations and safety
Simple interest does not compound. For investments where interest is reinvested to earn additional interest, use a compound interest calculator.
Frequently asked questions
What is the difference between Ordinary and Exact interest?
Ordinary interest uses a 360-day year, while Exact interest uses a 365-day year. Ordinary interest results in a slightly higher interest payout.
Can I calculate simple interest in months or weeks?
Yes, the calculator converts any chosen time unit (days, weeks, months, quarters, years) into the equivalent fractional year.
What is the Banker's Rule?
The Banker's Rule is another name for ordinary interest (360-day year) combined with exact day counts, which was historically favored by banks.