Simple Interest Calculator

Simple Interest Calculator — Formula, Examples & Uses

Simple Interest (SI) is the most basic form of interest calculation. Unlike compound interest, simple interest is calculated only on the original principal amount — not on accumulated interest. This makes it straightforward and easy to calculate manually.

Simple Interest Formula

SI = (P × R × T) / 100

Total Amount = P + SI

Where: P = Principal amount, R = Annual interest rate (%), T = Time in years.

Worked Examples

• Example 1: P = ₹10,000, R = 8%, T = 3 years → SI = (10000 × 8 × 3)/100 = ₹2,400. Total = ₹12,400.
• Example 2: P = $5,000, R = 5%, T = 2 years → SI = (5000 × 5 × 2)/100 = $500. Total = $5,500.
• Example 3: P = ₹50,000, R = 12%, T = 6 months (0.5 years) → SI = (50000 × 12 × 0.5)/100 = ₹3,000.

Where Is Simple Interest Used?

• Short-term loans: Personal loans, auto loans, and some bank deposits use simple interest.
• Treasury Bills: Government T-bills and short-term securities use simple interest.
• Car loans: Many car financing schemes calculate interest on the original principal.
• Certificates of Deposit: Some CDs calculate interest using the simple interest method.

Simple Interest vs. Compound Interest

Simple interest grows linearly — the same amount is added each year. Compound interest grows exponentially — interest is added to the principal each period, and the next period's interest is calculated on the new total. For long-term investments, compound interest always yields more. For short-term loans, simple interest is easier to understand and calculate.