What Is a Simple Interest Calculator?
A Simple Interest Calculator helps you quickly determine how much interest you will earn or pay on a fixed principal amount over a specific period at a fixed interest rate. Unlike compound interest, simple interest is calculated only on the original principal amount.
How Simple Interest Is Calculated
The formula for simple interest is:
Simple Interest = (Principal × Rate × Time) ÷ 100
If you invest ₹100,000 at 8% per year for 5 years:
Interest = (100000 × 8 × 5) ÷ 100 = ₹40,000
Total Amount = ₹140,000
When Should You Use Simple Interest?
- Personal loans
- Car loans (flat rate)
- Short-term business lending
- Fixed deposit comparisons
Real-Life Example
If you lend ₹50,000 at 10% simple interest for 3 years:
- Year 1: ₹55,000
- Year 2: ₹60,000
- Year 3: ₹65,000
Simple vs Compound Interest
Simple interest grows linearly. Compound interest grows exponentially. For long-term investments, compound interest generates higher returns.
Tips Before Taking a Loan
- Always check if the rate is flat or reducing balance.
- Compare APR instead of just interest rate.
- Use loan calculators before committing.
Limitations of Simple Interest
- No compounding benefits
- Less suitable for long-term investments
- Often used in short-duration loans
Who Should Use This Calculator?
Students, borrowers, investors, small business owners, and anyone comparing loan offers or fixed return investments.
Related Financial Calculators
- Compound Interest Calculator
- Loan EMI Calculator
- Fixed Deposit Calculator
- Investment Growth Calculator