Simple Interest Calculator
Calculate simple interest on loans, deposits, and investments
💡 Tip: Click value to edit directly. Supports shorthand (5L, 2.5Cr) or exact numbers (725000)
Common Interest Scenarios
Principal Amount
Interest Earned
Amount Breakdown
Interest Summary
Year-wise Growth Projection
Understanding Simple Interest
Simple Interest is calculated only on the principal amount throughout the entire period. Unlike compound interest, the interest earned does not earn additional interest, making calculations straightforward and predictable.
Key Features of Simple Interest:
- Linear Growth: Interest remains constant each year
- Easy Calculation: Straightforward formula without compounding
- Predictable Returns: Exact interest amount known in advance
- Common Usage: Personal loans, car loans, short-term investments
- Lower Returns: Generally lower than compound interest
Simple Interest Formula:
Simple Interest is calculated using the formula:
Where: Principal = Initial amount, Rate = Annual interest rate (%), Time = Time period in years
Simple vs Compound Interest:
- Simple Interest: Interest calculated only on principal
- Compound Interest: Interest calculated on principal + accumulated interest
- Time Factor: Difference increases significantly over longer periods
- Usage: Simple for loans, compound for investments
Frequently Asked Questions
When is simple interest used instead of compound interest?
Simple interest is commonly used in personal loans, car loans, short-term loans, and some savings accounts. It's preferred when lenders want predictable payment structures.
How does simple interest differ from compound interest?
Simple interest is calculated only on the principal amount, while compound interest includes interest on previously earned interest. Over time, compound interest yields significantly higher returns.
Can I use this calculator for loan payments?
Yes, but remember that most loans use compound interest and EMI structures. This calculator is best for understanding basic interest concepts and short-term calculations.
What types of investments use simple interest?
Very few modern investments use simple interest. Most bonds, deposits, and investment products use compound interest. Simple interest is mainly educational or for specific loan calculations.
Is simple interest better for borrowers or lenders?
Simple interest is better for borrowers as they pay less interest over time compared to compound interest. Lenders prefer compound interest for higher returns.