Simple Interest Calculator
Simple interest is charged only on the original amount, not on interest already earned. Use this calculator for short loans, some deposits and school problems where interest does not compound.
Estimates for general information. This is not financial advice.
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From related categoriesHow to use this calculator
- Enter the principal, the original amount.
- Enter the yearly interest rate.
- Enter the time in years. Convert months by dividing by 12.
- Read the interest and the total amount.
The formula
Worked example
Principal ₹50,000, rate 8% a year, time 3 years: interest = 50,000 × 8 × 3 ÷ 100 = ₹12,000. Total amount = ₹62,000.
Understanding your result
Interest grows by the same amount every year, so a graph of the balance is a straight line. If interest were added to the principal each year (compounding), the balance would curve upward and end higher.
When to use it
- Estimate interest on a private loan between friends or family.
- Check a deposit that pays simple interest.
- Solve textbook problems and verify answers.
In-depth guide
Simple versus compound interest on ₹50,000 at 8%
Simple interest adds the same amount every year. Compound interest is calculated on a growing balance. The table compares both on the example amount.
| Years | Simple interest | Total (simple) | Total (compound yearly) |
|---|---|---|---|
| 1 | ₹4,000 | ₹54,000 | ₹54,000 |
| 3 | ₹12,000 | ₹62,000 | ₹62,986 |
| 5 | ₹20,000 | ₹70,000 | ₹73,466 |
| 10 | ₹40,000 | ₹90,000 | ₹1,07,946 |
| 15 | ₹60,000 | ₹1,10,000 | ₹1,58,608 |
Where simple interest is used
- Some short-term personal loans and informal lending.
- Certain bonds that pay a fixed coupon.
- School problems and quick estimates.
Finding the rate or the time
You can rearrange the formula. Rate = Interest × 100 ÷ (Principal × Time). Time = Interest × 100 ÷ (Principal × Rate). If ₹12,000 interest was earned on ₹50,000 over 3 years, the rate is 12,000 × 100 ÷ (50,000 × 3) = 8%.
Months and days
Time must be in years. Convert months by dividing by 12, so 9 months is 0.75 years. For days, divide by 365.
Limits
The calculator assumes a constant rate and no compounding. Most bank deposits and loans compound, so use the Compound Interest or EMI calculators for them.
Assumptions and limits
Assumes a constant rate and no compounding. Many bank products compound, so use the compound interest calculator for those.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest uses only the original principal. Compound interest also charges interest on interest already added.
How do I enter months?
Divide the months by 12. For 9 months enter 0.75 years.
Can the rate be zero?
Yes. The interest will be zero and the total equals the principal.
Is simple interest used by banks?
Some short loans and a few products use it, but most deposits and loans compound.
Which is better for a borrower?
For the same rate and time, simple interest costs less than compound interest.