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Simple Interest Calculator

Calculate simple interest on any principal amount.

The amount you invest or borrow
Annual interest rate
Investment or loan duration

SI Results

Enter your investment details to calculate simple interest.

Understanding Simple Interest

Simple interest is interest calculated only on the principal amount, not on accumulated interest from previous periods. It's straightforward to calculate and commonly used for short-term loans and some investment products. Unlike compound interest, simple interest grows at a constant rate, making it easier to predict your costs or earnings.

Simple & Transparent

Simple interest is straightforward to calculate. You know exactly how much interest you'll pay or earn each year, with no surprises from compounding effects.

Linear Growth

Interest grows at a constant rate each year. This linear growth makes budgeting and financial planning simpler, especially for short-term loans.

Borrower-Friendly

For borrowers, simple interest is advantageous because total interest doesn't compound. The longer you borrow, the less attractive the option becomes compared to compound interest.

Common in Business

Simple interest is frequently used in business loans, trade credit, and short-term financial arrangements. It's also used in some traditional bank products.

Simple Interest vs Compound Interest

Aspect Simple Interest Compound Interest
Calculation On principal only On principal + accumulated interest
Growth Pattern Linear (constant) Exponential (accelerating)
Formula SI = (P × R × T) / 100 A = P(1 + r/n)^(nt)
Best For Short-term loans Long-term investments
Interest Over Time Same every year Increases each period

Real-World Simple Interest Examples

Example 1: Personal Loan

Scenario: You borrow ₹50,000 at 10% simple interest for 3 years

Calculation: SI = (50,000 × 10 × 3) / 100 = ₹15,000

Total Amount: ₹50,000 + ₹15,000 = ₹65,000

Note: You pay ₹15,000 in interest regardless of when within 3 years you repay

Example 2: Short-Term Fixed Deposit

Investment: ₹1,00,000 in FD at 6% simple interest for 2 years

Calculation: SI = (1,00,000 × 6 × 2) / 100 = ₹12,000

Total Amount: ₹1,00,000 + ₹12,000 = ₹1,12,000

Interest per Year: ₹6,000 (same each year)

Example 3: Monthly and Daily Calculations
Time Period Principal Rate Interest Total Amount
12 Months ₹10,000 8% ₹800 ₹10,800
6 Months ₹10,000 8% ₹400 ₹10,400
90 Days ₹10,000 8% ₹197.26 ₹10,197.26

Simple interest is proportional to time - half the period gives half the interest.

Simple Interest Formula & Calculation

Simple Interest Formula

SI = (P × R × T) / 100

Total Amount = P + SI

Formula Components
  • SI = Simple Interest
  • P = Principal (initial amount)
  • R = Interest rate per annum (%)
  • T = Time in years (divide by 12 for months, by 365 for days)
Step-by-Step Calculation Example

Given:

  • Principal (P) = ₹25,000
  • Rate (R) = 9% per annum
  • Time (T) = 4 years

Calculation:

  1. SI = (P × R × T) / 100
  2. SI = (25,000 × 9 × 4) / 100
  3. SI = 900,000 / 100
  4. SI = ₹9,000

Result: Total Amount = ₹25,000 + ₹9,000 = ₹34,000

Frequently Asked Questions

Simple interest is interest calculated only on the principal amount, not on accumulated interest. The interest amount remains constant throughout the loan or investment period. Simple Interest = (Principal × Rate × Time) / 100. For example, ₹1,000 at 10% simple interest for 2 years earns ₹200 in interest (₹1,000 × 10% × 2 ÷ 100).

Simple interest is calculated using the formula: SI = (P × R × T) / 100, where P is principal, R is annual interest rate (%), and T is time in years. For months, divide by 12, and for days, divide by 365. Example: ₹5,000 at 8% for 3 years = (5,000 × 8 × 3) / 100 = ₹1,200. Simple interest remains the same each year.

Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest. Simple interest grows linearly, while compound interest grows exponentially. Example: ₹1,000 at 10% for 2 years: Simple Interest = ₹1,200, Compound Interest = ₹1,210. Compound interest is higher for longer periods, especially with more frequent compounding.

Simple interest is commonly used for short-term loans, car loans, personal loans, and some educational loans. It's simpler to calculate and understand, making it popular for quick borrowing. Banks use compound interest for savings accounts and deposits, while simple interest is often used for shorter-term lending products and trade credit arrangements.

To calculate simple interest on a loan, use: SI = (Principal × Rate × Time) / 100. Example: ₹1,00,000 loan at 12% for 5 years = (1,00,000 × 12 × 5) / 100 = ₹60,000 in interest. Total amount to repay = ₹1,60,000. The interest remains the same regardless of when you repay, as long as you repay within the agreed time period.

Simple interest depends on three factors: (1) Principal - the initial amount, (2) Rate - the annual interest percentage, (3) Time - the duration in years. Higher principal, higher rate, or longer time period results in higher interest. The relationship is directly proportional - doubling any factor doubles the interest earned or paid. This proportional relationship makes simple interest predictable.

Yes, you can calculate simple interest for any time period by adjusting the time value in the formula. For months: SI = (P × R × M) / (100 × 12), where M is months. For days: SI = (P × R × D) / (100 × 365), where D is days. Many banks use 360 days per year for interest calculation. This calculator supports years, months, and days for complete flexibility.

Simple interest is lower because it only calculates interest on the original principal. Compound interest calculates interest on principal plus previously earned interest, creating exponential growth. Over time, this difference becomes significant. Simple interest grows linearly at a constant rate, while compound interest accelerates. This is why savers prefer compound interest, but borrowers prefer simple interest.
Simple Interest Tips
  • Simple interest is ideal for understanding loan costs quickly
  • Always verify if a loan uses simple or compound interest
  • For short-term loans, simple interest is usually cheaper
  • Interest is proportional to time - shorter duration means less interest
  • Early repayment reduces simple interest proportionally
  • Compare simple interest with compound interest for investments
Important Disclaimer
This simple interest calculator is for educational and informational purposes only. Results are estimates based on the values you provide. Actual interest calculations may vary based on bank policies, holidays, and calculation methods. Always verify with your bank or lender before making financial decisions.
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