Calculate Simple Interest on a Loan

Excel & Google Sheets

How it works

Simple interest is charged only on the original principal — it never compounds. So the math is a straight multiplication: principal × annual rate × years. Borrowing $10,000 at 5% for 3 years costs 10000 × 0.05 × 3 = $1,500 in interest, and the total repayment is principal plus interest: =A2*(1+B2*C2) = $11,500. Enter the rate as a decimal or a percent-formatted cell (0.05 or 5%) — both store the same value. Compare that with compound interest, which would charge interest on the interest and come out higher over the same term.

A2

The principal — the amount borrowed or deposited.

*B2

Times the annual interest rate as a decimal (5% = 0.05).

*C2

Times the term in years. Use 0.5 for six months.

=A2*(1+B2*C2)

Total repayment in one cell: principal plus all the interest.

When to use it

Use it for short-term business loans, invoice financing, bonds sold at a flat coupon, or checking a lender's quote before signing.

Common mistakes

• ✕Entering the rate as 5 instead of 0.05.

  ✓=10000*5*3 charges 150,000 in interest. Type 0.05, or format the cell as a percent and type 5%.

• ✕Mismatched rate and time units.

  ✓An annual rate with a term in months multiplies interest by 12. Convert months to years (18 months = 1.5) or use a monthly rate with months.

• ✕Using simple interest for a compounding loan.

  ✓Credit cards and most bank loans compound — simple interest understates the true cost. For amortized monthly payments, use PMT instead.