Simple Interest Calculator
Simple interest is a quick and easy method of calculating the interest charge on a loan or the return on an investment. Unlike compound interest, simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
How is Simple Interest calculated?
The formula for Simple Interest is straightforward as interest is only calculated on the original principal amount, not on accrued interest.
SI = (P × R × T) / 100
Where:
P = Principal Amount
R = Rate of Interest per annum
T = Time in years
Example:
If you take a personal loan of ₹1,00,000 at a simple interest rate of 10% per annum for 5 years:
SI = (1,00,000 × 10 × 5) / 100 = ₹50,000
Total Amount Payable = ₹1,00,000 + ₹50,000 = ₹1,50,000.
Where is Simple Interest used?
- Short-term Loans: Many personal loans and short-term vehicle loans use simple interest.
- Bonds: Some corporate bonds pay simple interest on the face value.
- Everyday Math: It is the easiest way to do quick mental math for rough financial estimates.