Enter principal, interest earned/paid, and time in years; the tool instantly returns your annual simple-interest rate. Average U.S. personal-loan rates run 11.48 % (Federal Reserve, 2024).
Simple Interest Rate Calculator
Simple Interest Rate:
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How to use the tool
Principal (P): Type the original amount. Example inputs: 8 500 or 10 500.
Interest (I): Enter total interest paid or earned. Example inputs: 680 or 750.
Time (t): Supply the period in years; decimals allowed. Example inputs: 1.75 or 4.
Calculate: The tool shows the yearly simple interest rate rounded to two decimals.
Formula
The rate (r) is found with:
$$ r = rac{I}{P \times t}\times100 $$
Example 1
P = $8 500
I = $680
t = 1.75 yr
$$ r = rac{680}{8\,500 \times 1.75}\times100 = 4.57\% $$
Example 2
P = $15 000
I = $1 200
t = 3 yr
$$ r = rac{1\,200}{15\,000 \times 3}\times100 = 2.67\% $$
Quick-Facts
The formula above is standard in finance (Investopedia, 2023).
Average U.S. personal-loan rate: 11.48 % in Feb 2024 (Federal Reserve, 2024).
Simple interest ignores compounding; compounding can raise costs by 20–30 % (SEC “Compound Interest”, 2023).
Lenders must disclose annual interest rates under the Truth in Lending Act (12 C.F.R. §1026).
What is simple interest?
Simple interest is interest charged only on the principal, not on previously earned interest (Investopedia, 2023).
How does the calculator find the rate?
It divides interest by the product of principal and time, then multiplies by 100 to convert to a percentage.
When should you use simple instead of compound interest?
Use simple interest for short-term loans, car financing, and some Treasury bills where interest does not compound (U.S. Treasury, 2023).
Can the tool handle decimals?
Yes. Enter decimals for time (e.g., 1.25 yr) or cents; negative values are invalid.
Why input time in years?
The annual rate assumes a one-year period; convert months by dividing by 12 (Federal Reserve, 2024).
How do I convert months to years?
Divide the number of months by 12. For example, 9 months = 0.75 year.
Do banks still use simple interest?
Many auto loans and short-term personal loans use simple interest structures (Consumer Financial Protection Bureau, 2023).
What is a competitive simple interest rate?
Rates below the national average (11.48 %) are considered competitive for unsecured personal loans (Federal Reserve, 2024).
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