Simple Interest Explained: Formula, Examples and Uses
Simple interest is calculated only on the original amount: SI = P × R × T ÷ 100. For ₹50,000 at 8% a year for 3 years, interest is ₹12,000 and the total is ₹62,000. Compound interest also earns interest on past interest, so it grows faster over time.
Key facts
- Formula: SI = P × R × T ÷ 100 (R per year, T in years)
- Total amount = P + SI
- Calculator supports yearly or monthly rates and a start–end date range
- Compound interest: A = P(1 + r/n)^(nt)
Worked examples
| Principal | Rate | Time | Simple interest | Totale |
|---|---|---|---|---|
| ₹10,000 | 10% / year | 1 year | ₹1,000 | ₹11,000 |
| ₹50,000 | 8% / year | 3 years | ₹12,000 | ₹62,000 |
| ₹2,00,000 | 7.5% / year | 5 years | ₹75,000 | ₹2,75,000 |
| ₹20,000 | 1% / month | 6 months | ₹1,200 | ₹21,200 |
Simple vs compound interest
✕✓🧮 Take ₹1,00,000 at 10% a year for 10 years. With simple interest you earn ₹10,000 every year – ₹1,00,000 in total, ending with ₹2,00,000. Compounded yearly, the amount becomes about ₹2,59,374, because each year's interest itself earns interest.
| Anno | Simple interest total | Compound (yearly) total |
|---|---|---|
| 1 | ₹1,10,000 | ₹1,10,000 |
| 3 | ₹1,30,000 | ₹1,33,100 |
| 5 | ₹1,50,000 | ₹1,61,051 |
| 10 | ₹2,00,000 | ≈ ₹2,59,374 |
Savers benefit from compounding; borrowers pay less with simple interest. Always check which one a loan or deposit uses.
Using the Simple Interest Calculator – step by step
Step 1: Enter the principal
Open the Simple Interest Calculator and type the starting amount.
Step 2: Enter the rate and choose yearly or monthly
Most loans and deposits quote a yearly rate.
Step 3: Set the time
Enter the number of years, or choose start and end dates for an exact period.
Common mistakes
✕✓- Mixing a monthly rate with time in years (or the reverse).
- Forgetting to divide by 100 when using the formula by hand.
- Assuming a "flat rate" loan has the same cost as a reducing-balance loan – flat-rate loans usually cost more.
Open the Simple Interest Calculator on pdfseotools.com – free, no sign-up and it works on any device.
Domande frequenti
What is the simple interest formula?
SI = P × R × T ÷ 100, where P is the principal, R the rate per year in percent and T the time in years.
How is compound interest different?
Compound interest adds the interest to the principal each period, so the next period earns interest on interest. Over long periods it grows much faster than simple interest.
What is the compound interest formula?
A = P × (1 + r/n)^(n × t), where r is the yearly rate as a decimal, n the number of compounding periods per year and t the years. Interest = A − P.
Can I use a monthly rate in the calculator?
Yes. Choose the monthly period and enter the rate per month; the time is then counted in months.
Can I calculate between two dates?
Yes. Choose the date option and enter the start and end dates; the calculator counts the actual days between them (actual/365).
Where is simple interest used?
Many short-term personal loans, some car loans, fixed-deposit payouts that are paid out rather than reinvested, and most school maths problems.
Summary
Simple interest: P × R × T ÷ 100, on the original amount only. Compound interest grows on itself. Try the Simple Interest Calculator and more free online calculators.
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