Loan Interest Calculator

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Reviewed by: David Chen, CFA
David is a Chartered Financial Analyst with 15 years of experience in consumer lending and financial modeling.

This 4-in-1 Loan Interest calculator helps you find the total simple interest on a loan. Enter any three variables—Loan Amount, Annual Rate, Term (in years), or Total Interest—to solve for the fourth.

Loan Amount ($) (P)

Annual Rate (%) (R)

Loan Term (Years) (T)

Total Simple Interest ($) (I)

Simple Interest Formulas

Solve for Total Interest (I):
I = P * (R / 100) * T

Solve for Loan Amount (P):
P = I / ((R / 100) * T)

Solve for Annual Rate (R):
R = (I / P / T) * 100

Solve for Loan Term (T):
T = I / (P * (R / 100))

Formula Source: Investopedia

Formula Variables

(P) Loan Amount (Principal): The initial amount of money borrowed.
(R) Annual Rate: The annual interest rate as a percentage (e.g., 5% = 5).
(T) Loan Term (Years): The total length of the loan, expressed in years.
(I) Total Simple Interest: The total dollar amount of interest paid over the life of the loan.

Related Calculators

What is Loan Interest?

Interest is the cost of borrowing money. When you take out a loan, you must pay back the principal (the amount you borrowed) plus an additional fee, which is the interest. This interest is how the lender makes a profit.

This calculator deals with **simple interest**, which is the most basic way to calculate this cost. Simple interest is calculated *only* on the original principal amount. This is different from compound interest, where interest is calculated on the principal *plus* any interest that has already accumulated.

Simple interest loans, such as “interest-only” loans or some short-term personal loans, are straightforward to calculate. You can use this tool to quickly find any of the four main components. For example, if you know how much interest you paid ($I), the rate ($R), and the term ($T), you can solve for the original loan amount ($P).

How to Calculate Simple Loan Interest (Example)

Identify Your Loan Details
You want to borrow $10,000 (P) for a home improvement project. The lender offers you a 3-year (T) personal loan at a 5% (R) simple annual rate. You want to find the Total Interest (I) you will pay.
Convert Rate to Decimal
First, convert the annual rate from a percentage to a decimal: 5% / 100 = 0.05
Apply the Simple Interest Formula
The formula is: I = P * R * T
Formula: I = P * (R / 100) * T
Calculate the Interest
I = $10,000 * (5 / 100) * 3
I = $10,000 * 0.05 * 3
I = $500 * 3
I = $1,500
Final Result
You will pay $1,500 in total simple interest over the 3-year life of the loan.

Frequently Asked Questions (FAQ)

What’s the difference between simple and compound interest?

Simple interest is calculated *only* on the principal amount. Compound interest is calculated on the principal *and* on the accumulated interest. For this reason, compound interest grows much faster. Most savings accounts use compound interest, while some loans use simple interest.

Does this calculator work for amortized loans (like mortgages)?

No. This calculator is for simple interest only. An amortized loan (like a mortgage or auto loan) uses a complex formula where each payment covers both principal and interest, and the interest calculation changes each month. For those, you must use our Loan Amortization Calculator.

When is simple interest used for loans?

Simple interest is common in shorter-term loans. Some examples include auto loans (many car loans use simple interest on a daily basis), “interest-only” loans where you only pay the interest for a set period, and some short-term personal loans.

How do I find the interest rate on a loan?

If you know the loan terms, you can use this calculator. Enter the Loan Amount (P) you borrowed, the Total Interest (I) you paid, and the Loan Term (T) in years. Leave the “Annual Rate (R)” field blank and click “Calculate.” The result will show you the simple annual rate you paid.

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