Simple Interest Calculator

When this applies

• You have a loan or deposit on a simple-interest basis and need the interest.
• You want a quick comparison against a compound-interest figure.
• You are checking an interest amount someone else computed.
• You are estimating the return on a short-term arrangement.

INR 1,00,000 at 8% for 3 years

1. 1Principal INR 1,00,000, rate 8% a year, time 3 years.
2. 2Interest = 1,00,000 x 8 x 3 / 100 = INR 24,000.
3. 3Maturity = 1,00,000 + 24,000 = INR 1,24,000.

Interest of INR 24,000 and a maturity amount of INR 1,24,000.

What this calculator does

Work out simple interest on a principal over a period, and the maturity amount. Simple interest is charged only on the original principal, so it grows in a straight line.

How this is calculated

Simple interest is the principal multiplied by the annual rate and the time in years, divided by 100: SI = P x R x T / 100. Unlike compound interest it is never charged on interest already accrued, so the amount added each year is the same and the maturity amount is the principal plus the interest.

The formula

SI = P × R × T ÷ 100 · Maturity = P + SI

Common mistakes to avoid

• Using simple interest for a reducing-balance loan

  Most retail loans charge interest on the reducing balance, which is neither simple nor compound interest in the textbook sense. The interest will be lower than this figure.

• Leaving the period in months

  The formula needs years. Entering months as though they were years overstates the interest twelvefold.

• Assuming a fixed rate

  A rate that changes mid-period needs the period split; applying one rate to the whole period is wrong.

Frequently asked

What is the simple interest formula?

SI = P x R x T / 100, where P is the principal, R is the annual rate as a percentage and T is the time in years. The maturity amount is P plus SI.

How is simple interest different from compound interest?

Simple interest is charged only on the principal, so it grows linearly. Compound interest is charged on the principal and the accumulated interest, so it grows faster.

What if the period is in months or days?

Convert to years first. Six months is 0.5 years; a number of days is the days divided by 365 for a year-based rate.

Which loans use simple interest?

Some personal and short-term loans, and certain informal arrangements, are on a simple-interest basis. Many retail loans use reducing-balance interest, which is not the same as simple interest.

Does the rate change over time?

This calculator assumes a constant rate. A rate that changes part way through needs the period split and each part computed separately.