Simple Interest Calculator
Simple interest is interest charged only on the original principal, never on interest already earned. That makes it easy to predict: the amount added is the same every year. This calculator shows the interest and the total maturity amount for any principal, rate and term.
The original sum borrowed or invested.
- Principal
- Interest
Year-by-year interest
| Year | Interest to date | Total amount |
|---|---|---|
| 1 | ₹8,000 | ₹1,08,000 |
| 2 | ₹16,000 | ₹1,16,000 |
| 3 | ₹24,000 | ₹1,24,000 |
| 4 | ₹32,000 | ₹1,32,000 |
| 5 | ₹40,000 | ₹1,40,000 |
How to calculate simple interest
The principal stays fixed, and each year adds the same flat interest of principal times rate. Because past interest never earns interest of its own, the balance grows in a straight line rather than the curve you see with compound interest. Simple interest is common on car loans, many personal and short-term loans, and some fixed deposits.
SI = P × R × T ÷ 100 (R in % per year, T in years)Example. A principal of ₹1,00,000 at 8% for 5 years earns ₹40,000 in simple interest, for a total of ₹1,40,000. Every year adds the same ₹8,000.
Simple interest vs compound interest
With simple interest you earn (or pay) a flat amount on the principal alone. With compound interest, each period's interest is added to the balance and then earns interest itself, so the total grows faster over time. For a borrower, simple interest is usually cheaper. For a saver, compound interest builds more wealth. Over short terms the two are close, but the gap widens the longer the money is left.
Calculating simple interest for months or days
The formula uses time in years, so convert first. For months, divide by 12 (6 months is 0.5 years). For days, divide by 365. For example, 9 months is 0.75 years, so a principal of 50,000 at 10% earns 50,000 times 0.10 times 0.75, which is 3,750.
Frequently asked questions
What is the formula for simple interest?
Simple interest equals principal times rate times time, divided by 100 when the rate is a percentage. The total amount you repay or receive is the principal plus that interest.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal, so the same amount is added each period. Compound interest is calculated on the principal plus all previously earned interest, so it grows faster over time.
How do I calculate simple interest for a period in months?
Convert the months into years by dividing by 12, then apply the formula. For example, 6 months becomes 0.5 years and 18 months becomes 1.5 years.
Which loans use simple interest?
Many car loans, personal loans and other short-term loans use simple interest, as do some fixed deposits. Credit cards and most savings accounts use compound interest instead.
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