Simple Interest Calculator
Work out simple interest and the total amount for any principal, rate and time, and see how much more the same rate would earn with compounding.
₹1,00,000 at 8% simple interest for 3 years earns ₹24,000. Compounded yearly, the same rate would earn ₹25,971.
Simple interest is charged only on the original amount. Most bank deposits and loans in India compound, so use this for informal loans, some short-term deposits and checking textbook sums.
What is simple interest?
Simple interest is interest charged or earned only on the original amount (the principal), never on interest already added. It grows by the same amount every year.
Simple interest formula
SI = P × R × T ÷ 100 and Total amount = P + SI
- P = principal
- R = rate (% a year)
- T = time in years (6 months = 0.5)
Worked example
₹1,00,000 at 8% a year for 3 years:
- SI = 1,00,000 × 8 × 3 ÷ 100 = ₹24,000
- Total amount = ₹1,24,000
- With yearly compounding, the same rate would earn ₹25,971
Watch out for flat-rate loans
Some consumer, two-wheeler and informal loans quote a flat rate: simple interest on the full amount for the whole tenure, even though you repay part of it every month. A ₹1 lakh loan at 10% flat for 3 years means ₹30,000 interest and an EMI of about ₹3,611, which equals a reducing-balance rate of about 17.9%. Always ask for the reducing-balance rate or the APR.
Where simple interest is used
- Informal loans between people, and some short-term lending
- Interest on delayed payments and some penalties
- School and competitive-exam maths
Bank FDs, RDs, PPF and most loans compound, so use the compound interest calculator for those.
When to use a different calculator
- Interest that compounds? Use the Compound Interest Calculator.
- A bank deposit? Use the FD Calculator or the RD Calculator.
- A loan repaid in EMIs? Use the Personal Loan EMI Calculator.
