Simple Interest Calculator
Simple interest is the most basic way to price borrowing or a deposit: it is charged only on the original principal, never on interest already earned. This simple interest calculator takes a principal, a rate, and a time period and instantly returns the interest and the total amount payable. It is handy for short-term personal loans, some vehicle loans, and certain deposits or bonds where interest does not compound.
Total Amount
₹1,40,000
Principal
₹1,00,000
Interest
₹40,000
About the Simple Interest Calculator
A simple interest calculator computes the interest and total repayment on a principal over any period using a flat, non-compounding method. Unlike compound interest, it applies the rate only to the original principal, so the interest amount is the same in every period.
Why it is useful
Simple interest is easy to overlook because most bank loans use reducing-balance (compound) interest. But it still appears in short-term borrowings, friendly loans, and some bonds. A calculator lets you check what such a loan or deposit actually costs or earns, and compare it fairly against a compounding alternative.
How the calculation works
The formula is Simple Interest = Principal × Rate × Time ÷ 100 (SI = P × R × T ÷ 100), where R is the annual rate in per cent and T is the time in years. The total amount payable is then Total = P + SI, since the interest never gets added back to the principal.
Key inputs explained
- Principal: The original sum borrowed or deposited, before any interest.
- Rate of interest: The annual rate in per cent per annum.
- Time period: The duration of the loan or deposit, expressed in years.
Example calculation
Inputs
- Principal (P)
- ₹1,00,000
- Rate (R)
- 10% p.a.
- Time (T)
- 3 years
Calculation breakdown
- Simple interest
- 1,00,000 × 10 × 3 ÷ 100
- Interest amount
- = ₹30,000
- Total amount
- 1,00,000 + 30,000
The interest is a flat ₹10,000 a year, so ₹30,000 over 3 years, giving a total of ₹1,30,000. Under compound interest the same loan would cost slightly more, as interest would be charged on interest.
Benefits
- Simple and transparent — the interest is the same in every period.
- Easy to verify by hand, with no compounding to track.
- Useful for short-term loans and quick cost comparisons.
Limitations
- Rarely used by banks, which apply reducing-balance (compound) interest instead.
- Understates the true cost or return over long periods versus compounding.
- Ignores fees, GST, and other charges that a real loan may carry.
Tips
- Convert months to years (for example, 6 months = 0.5) before applying the formula.
- For a bank loan, use an EMI or compound interest calculator instead — simple interest will understate it.
- Compare a simple-interest deposit against a compounding FD to see which earns more.
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About this calculator
The Simple Interest Calculator is built and maintained by the PaisaBot team. All calculations run instantly in your browser using established financial formulas, and we use high-precision arithmetic to keep the results reliable.
Data accuracy: Interest rates, tax slabs, and scheme rules are updated periodically, but figures can change with RBI, government, and lender revisions. Always confirm the latest rates with your bank or an official source before acting.
Educational purpose: This tool is provided for general information and financial education only. It does not constitute investment, tax, or legal advice. For decisions specific to your situation, please consult a qualified financial advisor.