Simple Interest Calculator
Easy to use Simple Interest Calculator. Compute interest and total amount for loans or savings.
Input Values
Result
Total Amount
₹0
Understanding Simple Interest
Simple interest is the easiest way to calculate earnings or borrowing costs. It assumes that interest is paid only on the original amount (principal) and not on any accumulated interest.
Key Components:
- Principal (P): The money you borrow or invest.
- Rate (R): The percentage of the principal charged as interest each year.
- Time (T): The duration for which the money is borrowed/invested (usually in years).
Real World Example
If you lend ₹10,000 to a friend at 10% per year for 3 years:
- Year 1 Interest: ₹1,000
- Year 2 Interest: ₹1,000
- Year 3 Interest: ₹1,000
- Total Interest: ₹3,000. (In compound interest, this would have been ₹3,310!)
Frequently Asked Questions
What is Simple Interest?
Simple Interest (SI) is a quick method of calculating the interest charge on a loan. It is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
What is the formula for Simple Interest?
The formula is `SI = (P × R × T) / 100`, where P is Principal, R is Rate of Interest (per annum), and T is Time (in years).
How does Simple Interest differ from Compound Interest?
In Simple Interest, interest is calculated only on the initial principal amount. In Compound Interest, interest is calculated on the principal PLUS the accumulated interest from previous periods.
Is Simple Interest used in banks?
Rarely for savings. Banks mostly use simple interest for short-term loans or for the initial period of certain deposits. Most savings accounts and FDs use compound interest.
Can I use this for daily interest calculation?
Yes. If you have the rate per annum, convert the time into fraction of a year (e.g., 6 months = 0.5 years, 73 days = 73/365 years) to use the formula.
What happens if I double the rate?
Since the relationship is linear, doubling the interest rate will exactly double the total interest earned (assuming time and principal stay the same).
Is Simple Interest beneficial for borrowers?
Yes! Borrowers prefer simple interest because it is cheaper than compound interest over time. The interest amount does not grow on itself.
Does car loan use simple interest?
Often, car loans use a 'Flat Rate' which mimics simple interest calculation on the full principal, but this is usually misleading and more expensive than reducing balance interest.
What is 'Amount' in the result?
Amount (A) is the Total Repayment value. Formula: `A = Principal (P) + Interest (I)`.
Can the time period be in months?
Yes, just divide the number of months by 12 to convert it into years before using it in the standard formula. (e.g., 9 months = 0.75 years).