Simple interest calculator with working

• £500 at 4% a year for 3 years. Interest per year $= 4\%$ of £500 $= £20$. Over 3 years, $20 \times 3 = £60$. Total $= £560$.
• £2,000 at 3.5% for 6 months: $t = 0.5$, so $I = 2000 \times 3.5 \times 0.5 \div 100 = £35$.

Rearrange the formula:

• Rate: $r = \dfrac{100I}{Pt}$. If £400 earns £48 in 4 years, $r = 4800 \div 1600 = 3\%$.
• Time: $t = \dfrac{100I}{Pr}$. If £800 at 5% earns £120, $t = 12000 \div 4000 = 3$ years.

Simple interest grows by the same amount each year (a straight-line graph). Compound interest adds interest on the interest, so it grows faster (a curve). Most savings accounts and loans use compound interest; simple interest appears in maths questions and some short-term loans. Compare with our compound interest calculator.

Convert time to years: 6 months is 0.5 years, 9 months is 0.75 years, and 90 days is about $90 \div 365 \approx 0.247$ years. If a question gives a monthly rate, keep the time in months instead.

• Forgetting to divide by 100 (using 4 instead of 0.04).
• Giving the interest when the question asks for the total, or the other way round.
• Using compound interest when the question says simple.

Practise with our simple interest questions.

• Work out one year's interest first: it makes the rest easy.
• Give money to 2 decimal places, with the currency symbol.
• Check the answer makes sense: 4% of £500 is small (£20 a year).

• Savings accounts usually pay compound interest, quoted as an AER (annual equivalent rate).
• Loans show an APR (annual percentage rate), which includes fees, so it's the fairer way to compare loans.
• Overdrafts and credit cards often charge high rates, so a small balance can grow quickly.

Simple interest is still the clearest way to see how interest works: a fixed percentage of the original amount, paid each year.