How to Calculate Simple Interest

Simple interest is the amount of interest paid based on only the original amount lent or borrowed, rather than being based on accumulating interest. The formula for this is very simple: I=PRT, where I is interest, P is Principal, R is the percentage rate expressed as decimal and T is time, which is generally expressed in years, assuming your rate is an annual rate. This article shows you how to use this formula to calculate simple interest.

Edit Steps

1. Find the Principal. This is the amount of money borrowed or lent at the start of the year which the interest will be calculated for.


2. Find the Rate as a decimal. This is the percentage of the Principal you will pay back each year. Divide the percentage by 100 to give the decimal value.


3. Specify the Time in years over which you want the interest calculating.


4. Multiply Principle × Rate × Time to calculate the simple interest. This is the money you will pay/be paid on top of what was lent or borrowed.


5. Finished.

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Edit Tips

• This formula can be rearranged to allow you to work out the Principle (P=I÷RT), Rate (R=I÷PT) or Time (T=I÷PR)

Edit Related wikiHows

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