📐 Simple Interest Calculator

Understanding Simple Interest

Simple interest is the most basic way to calculate the cost of borrowing or the return on a deposit. It is charged only on the original principal, not on any interest already earned. It is commonly used for short-term loans, some vehicle loans and certain fixed-income products.

The formula is straightforward: SI = P × R × T ÷ 100, where P is the principal, R is the annual rate of interest, and T is the time in years. The total amount you repay or receive is simply the principal plus this interest.

For example, ₹50,000 at 10% simple interest for 3 years earns ₹15,000 in interest (50,000 × 10 × 3 ÷ 100), for a total of ₹65,000. Because interest does not compound, simple interest always costs less than compound interest over the same period and rate.

Key points to remember

• Simple interest is charged only on the principal, never on earned interest.
• It always totals less than compound interest for the same rate and time.
• Common in short-term and some vehicle loans.

Frequently asked questions

Simple interest is calculated only on the original principal; compound interest is calculated on the principal plus previously earned interest.

Short-term personal loans, some auto loans, and certain government and corporate bonds.