Simple Interest Calculator
Calculate simple interest, total amount, or find the missing variable - principal, rate, or time.
💰 What is Simple Interest?
Simple interest (SI) is the most basic form of calculating the cost of borrowing or the return on an investment. It is computed solely on the original principal amount for the entire duration of the loan or investment, regardless of whether interest has been paid or accumulated along the way. Because the base never changes, the interest earned or owed in each period is identical - hence the word "simple."
Simple interest is used in many real-world financial products. Short-term personal loans from certain institutions, some auto loans, certain government securities, and simple investment products like treasury bills often use simple interest. It is also the basis for calculating pro-rated interest on bank accounts for partial periods, and it forms the starting point for understanding more complex interest calculations like compound interest.
The three variables in simple interest are the principal (P), the annual interest rate (R), and the time period (T). Given any two of these and the resulting interest, you can always solve for the third. This calculator handles all four scenarios: finding SI given P, R, T; finding P given SI, R, T; finding R given P, SI, T; and finding T given P, SI, R.
The key distinction between simple and compound interest is that simple interest's base never grows - each period's interest is calculated on the same original principal. Compound interest calculates each period's interest on the growing balance (principal + accumulated interest). Over short periods, the difference between the two is minimal. Over long periods, compound interest produces dramatically higher totals, which is why long-term investments and loans almost always use compound interest.
📐 Simple Interest Formula
📖 How to Use This Calculator
Steps to Calculate Simple Interest
💡 Example Calculations
Example 1 — Find Simple Interest
₹50,000 at 9% p.a. for 4 years
Example 2 — Find the Rate
A loan of ₹25,000 earned ₹4,500 in interest over 3 years. What was the rate?
❓ Frequently Asked Questions
🔗 Related Calculators
What is simple interest?
Simple interest is interest calculated only on the original principal amount, not on accumulated interest. The formula is SI = (P × R × T) / 100, where P is principal, R is rate per annum, and T is time in years.
What is the simple interest formula?
SI = (P × R × T) / 100. Total Amount = P + SI = P(1 + RT/100). For example, ₹10,000 at 8% for 3 years: SI = (10,000 × 8 × 3) / 100 = ₹2,400. Total = ₹12,400.
When is simple interest used instead of compound interest?
Simple interest is typically used for short-term loans (car loans, personal loans at some institutions), Treasury bills, and some government securities. Most savings accounts, FDs, and long-term loans use compound interest, which grows faster and is less favourable for borrowers.
How is simple interest different from compound interest?
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus accumulated interest. For the same rate and period, compound interest always produces a higher total than simple interest. Over short periods, the difference is small; over decades, compound interest far exceeds simple interest.
What is the formula to find the rate if I know the interest paid?
Rate (R) = (SI × 100) / (P × T). For example, if you paid ₹3,000 as interest on a ₹20,000 loan for 2 years, R = (3,000 × 100) / (20,000 × 2) = 7.5% per annum.
What is the simple interest on ₹50,000 at 8% for 3 years?
SI = (P × R × T) / 100 = (50,000 × 8 × 3) / 100 = ₹12,000. Total amount = ₹50,000 + ₹12,000 = ₹62,000. Compare this to compound interest on the same inputs (annual compounding): A = 50,000 × (1.08)^3 = ₹62,986. The difference of ₹986 is small over 3 years, but grows dramatically over longer periods.
Which loans use simple interest?
Simple interest is commonly used for: gold loans from banks and NBFCs, short-term personal loans from cooperative societies and microfinance institutions, and some auto loans. Most home loans, FDs, and credit card balances use compound interest. When comparing loan offers, always confirm whether the rate is simple or compound - the same nominal rate will produce significantly different total repayments.
Is simple interest or compound interest better for a borrower?
Simple interest is always better for borrowers because the interest amount stays fixed and does not grow on itself. With compound interest, unpaid interest is added to the principal and starts accruing further interest. Over 5 years on a ₹5 lakh loan at 12%, SI totals ₹3 lakh in interest vs compound interest of ₹3.84 lakh - 28% more. For investors, compound interest is better.
How do I find the principal if I know the interest, rate and time?
Rearrange the SI formula: P = (SI × 100) / (R × T). For example, if you received ₹4,500 as interest at 9% per annum over 2.5 years: P = (4,500 × 100) / (9 × 2.5) = 4,50,000 / 22.5 = ₹20,000. This rearrangement is useful in financial planning and reverse-engineering loan agreements.