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Simple Interest Calculator

Calculate simple interest using the SI = PRT/100 formula.

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Simple interest explained

Simple interest is the most straightforward way to calculate the cost of borrowing money or the return on a basic savings instrument. Unlike compound interest, the interest amount is the same for every period — it never “compounds” onto itself. This makes it easy to predict exact repayment amounts.

Simple vs compound interest — practical difference

On ₹1,00,000 at 10% for 5 years:

  • Simple Interest: ₹50,000 interest → ₹1,50,000 total
  • CI (annual compounding): ₹61,051 interest → ₹1,61,051 total
  • CI (monthly compounding): ₹64,700 interest → ₹1,64,700 total

The gap widens significantly over longer periods, which is why compound interest is almost always preferable for long-term savings and investments.

Typical Indian use cases

  • Personal loans from moneylenders or NBFCs (often quoted as flat/simple rate)
  • Gold loans — typically charged on a simple interest basis
  • Short-term trade credit and supplier financing
  • Recurring Deposits (RDs) — interest is calculated simply on each instalment

Frequently asked questions

What is the simple interest formula?
Simple Interest (SI) = P × R × T ÷ 100, where P is the principal amount, R is the annual interest rate in percent, and T is the time period in years. The total amount = P + SI.
What is the difference between simple and compound interest?
In simple interest, interest is calculated only on the original principal throughout the entire period. In compound interest, interest is calculated on the principal plus previously accumulated interest, causing exponential growth. Compound interest always yields a higher return for the same rate and period.
Where is simple interest used?
Simple interest is commonly used for short-term personal loans, vehicle loans, some savings schemes, treasury bills, and certain fixed deposits where interest is paid out periodically rather than reinvested.
How do I convert months to years for the formula?
Divide the number of months by 12. For example, 18 months = 1.5 years. Similarly, convert days by dividing by 365. The calculator does this conversion automatically when you select 'Months' or 'Days' as the time unit.
Can simple interest be negative?
No — simple interest itself cannot be negative since it is a product of positive values (principal, rate, time). However, in an inflation context, the 'real' return can be negative if the interest rate is lower than the inflation rate.

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