Simple Interest Calculator
Simple interest is paid only on the original amount — it never earns interest on interest. Enter the amount, rate and time to see the interest and the total, plus how far behind compound interest it falls.
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How to use this calculator
- Enter principal amount
- Enter interest rate
- Enter time period — Use decimals for part years — 0.5 means six months.
- Read the result — it updates as you type.
The formula used
SI = P × R × T ÷ 100 · Total = P + SI
- P
- Principal — the original amount
- R
- Rate of interest per year, as a percentage
- T
- Time in years
Because the interest is always calculated on P alone, the amount earned each year is identical. Compound interest, by contrast, calculates on the growing balance.
Worked example
₹1,00,000 at 8% for 5 years.
- P₹1,00,000
- R8
- T5
- SI = 1,00,000 × 8 × 5 ÷ 100 = ₹40,000
- Total = ₹1,00,000 + ₹40,000 = ₹1,40,000
- Compound at the same rate = ₹1,46,933
Simple interest pays ₹8,000 every year without fail. Compounding would have added a further ₹6,933 over the five years.
Where simple interest is actually used
Most saving and investing products compound. Simple interest still turns up in a few important places, and it is the basis of most school maths problems on the topic.
Common real-world cases
- Many car and personal loans quoted on a "flat rate" basis — which is why a flat 8% loan costs far more than an 8% reducing-balance loan.
- Short-term informal lending between individuals.
- Some fixed deposits that pay interest out periodically rather than reinvesting it.
Watch out for "flat rate" loans
A flat-rate loan charges interest on the full original amount for the whole term, even though you are steadily repaying it. The effective rate is often close to double the quoted one. Compare with the EMI Calculator, which uses the honest reducing-balance method.
Tips and common mistakes
Getting more out of it
- Use this to check a "flat rate" loan quote — flat interest is far more expensive than the same rate on a reducing balance.
- For anything you are saving into, the Compound Interest Calculator is almost always the relevant one.
Mistakes to avoid
- Accepting a flat-rate loan because the number sounds low. The effective rate is often close to double.
- Using simple interest for deposits, which almost always compound.
- Entering months as if they were years — six months is 0.5.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is always calculated on the original amount. Compound interest is calculated on the original amount plus interest already earned, so it grows faster and the gap widens over time.
Which is better for a borrower?
Simple interest, if the rate is the same — you pay less. Be careful though: "flat rate" loans use simple interest on the full amount and are usually more expensive than a reducing-balance loan at the same quoted rate.
Can I use months instead of years?
Yes — enter the months as a decimal fraction. Six months is 0.5, nine months is 0.75.
Do banks use simple interest?
Rarely for deposits. Most Indian bank deposits compound quarterly. Simple interest appears mainly in loan quotes and short-term arrangements.
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Fixed Income Loan Interest CalculatorTotal interest you will pay over the life of a loan.
Loans Lump Sum CalculatorGrowth of a one-time investment at an expected annual return.
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