How a simple interest loan works
Interest builds up each day on the principal you still owe: the note rate ÷ 365 (or 360) × the balance. Each payment covers the interest built up since the last one, and the rest reduces the principal.
Paid on schedule, the monthly payment is the standard amortizing payment at the note rate ÷ 12. Paying late means more days of interest, so less of the payment goes to principal.
Worked example
A $25,000 loan at 7% for 5 years costs $495.03 a month, with $4,701.80 of interest if you pay on time. At the start, interest builds at $4.79 a day, so a payment 10 days late adds about $47.95 of interest.
On a 360-day basis, the daily interest is $4.86.
Why paying early saves money
Because interest is charged by the day, paying a few days early, or paying extra, cuts the principal sooner and lowers the interest on every later day. Late fees are separate from this extra interest.
What this calculator assumes
A fixed note rate, and on-time payments for the total interest. The daily interest uses the starting balance; it falls as you repay.
Borrowing in the UK?
The country choices above the inputs open separate local pages. In the UK, simple interest usually means a flat rate charged on the original amount for the whole term, which costs more. Choosing United Kingdom opens that page and resets the inputs; amounts are not converted.
For a UK flat-rate loan, use the UK simple loan calculator in pounds.
Inputs for the US simple interest loan calculator
Amount borrowed
The loan amount in US dollars.
Interest rate
The yearly note rate from your loan contract.
Term
How long you take to repay, in years.
Daily interest basis
Most lenders divide the yearly rate by 365; some use 360.
Days a payment is late
How many days after the due date a payment arrives. Enter 0 to skip.
CALCULATOR QUESTIONS
US simple interest loan calculator questions
How is interest calculated on a simple interest loan?
Each day, the balance × the note rate ÷ 365. A $25,000 balance at 7% builds about $4.79 of interest a day.
Is a simple interest car loan good?
Yes for most borrowers: interest is only charged on what you owe, and paying early or extra saves interest.
What happens if I pay late?
Interest keeps building each day until the payment arrives, so more of it goes to interest. You may also pay a late fee.
Is simple interest the same as a flat rate?
No. A flat rate, common in the UK, charges interest on the original amount for the whole term.