Simple Interest Calculator
Calculate simple interest on loans and deposits. Simple interest is calculated only on the principal amount.
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What is a Simple Interest Calculator?
A simple interest calculator helps you calculate the interest earned or paid on a principal amount when interest is calculated only on the original principal, not on previously earned interest. Simple interest is commonly used for short-term loans, some types of deposits, and financial instruments where interest doesn't compound.
Unlike compound interest, simple interest provides linear growth - the interest amount remains constant each period. Our calculator helps you quickly determine interest amounts for loans, deposits, and other financial transactions using simple interest calculations.
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Simple Interest Formula
The simple interest formula is straightforward:
Where:
- Principal = Initial amount invested or borrowed
- Rate = Annual interest rate (in percentage)
- Time = Time period (in years, months, or days)
Example: ₹1,00,000 at 8% per annum for 3 years: Interest = (1,00,000 × 8 × 3) / 100 = ₹24,000
Simple Interest vs Compound Interest
Simple Interest: Calculated only on the principal amount. Growth is linear and predictable.
Compound Interest: Calculated on principal + previously earned interest. Growth is exponential.
When to Use Simple Interest:
- Short-term loans (less than 1 year)
- Some types of personal loans
- Simple savings calculations
- Educational purposes and examples
Simple Interest Calculator for Loans
Simple interest is commonly used for:
- Short-term Personal Loans: Some lenders use simple interest for loans under 1 year
- Car Loans: Some auto loans calculate interest using simple interest method
- Education Loans: Interest during moratorium period may use simple interest
- Credit Cards: Some credit card interest calculations use simple interest
Always check with your lender whether they use simple or compound interest for accurate calculations.
Simple Interest on Fixed Deposit
Most fixed deposits in India use compound interest, but understanding simple interest helps:
- Compare different investment options
- Understand basic interest calculations
- Calculate interest for short-term deposits
- Educational and planning purposes
For long-term FDs, compound interest will always yield higher returns than simple interest at the same rate.
Advantages of Simple Interest
- Easy to Calculate: Simple formula, no complex calculations
- Predictable: Interest amount is constant and easy to forecast
- Transparent: Clear and straightforward for borrowers
- Lower Total Interest: For borrowers, simple interest means less total interest paid
- Fair for Short-term: Appropriate for loans under 1 year
About Simple Interest
Simple interest is calculated only on the principal amount (the original sum of money). Unlike compound interest, it doesn't include interest on previously earned interest.
Simple Interest Formula
Simple Interest = (Principal × Rate × Time) / 100
Where:
- Principal = Initial amount invested or borrowed
- Rate = Annual interest rate (in percentage)
- Time = Time period (in years, months, or days)
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