Simple Interest Calculator
Calculate simple interest and the total amount payable.
Updates as you type.
What is Simple Interest
Simple interest is a quick and straightforward way to calculate the interest charged or earned on a sum of money. It is calculated only on the original principal, and never on any interest that builds up over time. This makes it easy to understand and predict, which is why it is commonly used for short-term loans, car loans, personal loans and certain fixed deposits in India.
Because the interest is fixed each year, simple interest grows in a straight line rather than accelerating. A simple interest calculator lets you instantly find both the interest amount and the total payable or maturity value, saving you from manual calculations. The rates used in examples here are illustrative, so always verify the current rate from your bank or lender.
Simple Interest Formula
The formula for simple interest is:
- SI = (P × R × T) ÷ 100
Where:
- SI = simple interest
- P = principal (the amount borrowed or invested)
- R = annual rate of interest in percent
- T = time period in years
To find the total amount you will repay or receive at maturity:
- Total Amount = P + SI
If your time period is in months, convert it to years by dividing by 12. For example, 18 months equals 1.5 years. This keeps the formula consistent and accurate.
Worked Example of Simple Interest
Suppose you take a loan of ₹50,000 at an annual interest rate of 10% for 3 years.
Here P = 50,000, R = 10 and T = 3.
- SI = (50,000 × 10 × 3) ÷ 100
- SI = 15,00,000 ÷ 100 = ₹15,000
- Total Amount = 50,000 + 15,000 = ₹65,000
So you would pay ₹15,000 as interest over three years and repay ₹65,000 in total. The table below shows how the interest on ₹50,000 at 10% grows year by year under simple interest, staying flat at ₹5,000 per year.
| Year | Interest that year | Total Amount |
| 1 | ₹5,000 | ₹55,000 |
| 2 | ₹5,000 | ₹60,000 |
| 3 | ₹5,000 | ₹65,000 |
Simple Interest vs Compound Interest
The big difference between the two is what the interest is calculated on. Simple interest is always based on the original principal, so the interest amount stays the same every year. Compound interest is calculated on the principal plus accumulated interest, so it grows faster over time.
For the example above, ₹50,000 at 10% for 3 years gives ₹15,000 under simple interest. With annual compounding, the same investment would earn about ₹16,550, slightly more because of the compounding effect. For short tenures the gap is small, but over long periods compound interest pulls far ahead. As a borrower, simple interest loans are usually cheaper; as an investor, compound interest helps your savings grow faster. Always confirm whether your loan or deposit uses simple or compound interest before signing.
Frequently Asked Questions
Simple interest is calculated as SI = (P × R × T) ÷ 100, where P is the principal, R is the annual interest rate in percent and T is the time in years. The total amount payable is P plus SI.
First find the interest using SI = (P × R × T) ÷ 100, then add it to the principal: Total Amount = P + SI. For ₹50,000 at 10% for 3 years, the total is ₹65,000.
Simple interest is charged only on the original principal, so it stays the same each year. Compound interest is charged on the principal plus accumulated interest, so it grows faster over time.
Convert the months into years by dividing by 12, then apply SI = (P × R × T) ÷ 100. For example, 6 months equals 0.5 years and 18 months equals 1.5 years.
Simple interest is often used for short-term and personal loans, car loans, and some fixed deposits. Always check with your lender or bank, as many loans use other methods like reducing-balance or compound interest.
It depends on your role. For borrowers, simple interest usually means lower total interest, so it is better. For investors and savers, compound interest grows your money faster and is generally more rewarding.