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Simple Interest Calculator

SI = P × R × T / 100 — solve for any variable, see year-by-year breakdown

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Enter principal, rate, and time to calculate simple interest.

Quick Formula Reference

SI = P × R × T / 100
A = P + SI
P = SI × 100 / (R × T)
R = SI × 100 / (P × T)
T = SI × 100 / (P × R)
CI = P × (1 + R/100)^T − P

Where: P = Principal  ·  R = Rate (% per annum)  ·  T = Time (years)  ·  A = Total Amount  ·  CI = Compound Interest

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What is Simple Interest?

Simple interest (SI) is the most straightforward method of calculating interest on a borrowed or invested amount. Unlike compound interest, simple interest is computed solely on the original principal — it never accumulates on previously earned interest. This makes calculations predictable and transparent, which is why simple interest is still widely used in personal loans, car loans, gold loans, and short-term fixed deposits across India.

The concept is fundamental to financial literacy. Whether you are evaluating a personal loan offer, planning a short-term fixed deposit, or simply trying to understand how a lender arrives at your total repayment amount, knowing how to calculate simple interest gives you a concrete advantage.

Simple Interest Formula (SI = PRT/100)

The formula for simple interest is:

SI = (P × R × T) / 100
A  = P + SI
  • P — Principal: the original sum borrowed or invested
  • R — Rate: the annual interest rate, expressed as a percentage
  • T — Time: the loan or investment duration in years
  • SI — Simple Interest: the interest earned or owed
  • A — Total Amount: the principal plus the interest

Worked Example: You deposit ₹50,000 in a scheme offering 8% per annum for 3 years.

SI = (50,000 × 8 × 3) / 100 = ₹12,000. Total Amount = ₹50,000 + ₹12,000 = ₹62,000.

How to Calculate Simple Interest Step by Step

Follow these four steps to calculate simple interest manually:

  1. Identify the principal (P): This is the initial amount — the loan amount or the amount invested.
  2. Find the annual interest rate (R): Usually stated in the loan agreement or FD offer letter as a percentage per annum.
  3. Convert time to years (T): If your period is in months, divide by 12. If in days, divide by 365.
  4. Apply the formula: SI = (P × R × T) / 100. Add SI to P to get the total repayment or maturity amount.

Simple Interest vs Compound Interest

The table below compares simple and compound interest on ₹1,00,000 at 10% per annum over different time periods:

Feature Simple Interest Compound Interest
Calculated onOriginal principal onlyPrincipal + accumulated interest
Growth patternLinear (straight line)Exponential (curve)
Interest for 1 year (₹1L at 10%)₹10,000₹10,000
Interest for 3 years (₹1L at 10%)₹30,000₹33,100
Interest for 5 years (₹1L at 10%)₹50,000₹61,051
Interest for 10 years (₹1L at 10%)₹1,00,000₹1,59,374
Better for borrowers?Yes — lower total interestNo — higher total interest
Better for investors?No — lower returnsYes — higher returns

When is Simple Interest Used?

Simple interest is used in several common financial products and situations in India:

  • Personal loans (flat rate): Many cooperative banks and NBFCs offer personal loans at a flat interest rate, which is simple interest applied to the original principal for the full tenure.
  • Car loans: Some auto financiers quote car loan interest as a flat rate, making SI the basis for total interest calculation.
  • Gold loans: Gold loans from banks and NBFCs like Muthoot Finance and Manappuram typically charge simple interest, often computed monthly or quarterly.
  • Short-term fixed deposits: FDs with tenure less than one year at some banks are calculated using simple interest rather than compound interest.
  • Government savings schemes: Some post office and government-backed short-term instruments use simple interest.
  • Education loans (moratorium period): During the moratorium (study period), interest on education loans is often charged on a simple interest basis.

Simple Interest Examples

Personal Loan

P = ₹2,00,000 | R = 12% p.a. | T = 2 years

SI = (2,00,000 × 12 × 2) / 100
SI = ₹48,000
Total = ₹2,48,000

Gold Loan (Monthly)

P = ₹75,000 | R = 9% p.a. | T = 8 months

T = 8/12 = 0.667 years
SI = (75,000 × 9 × 0.667) / 100
SI = ₹4,500
Total = ₹79,500

Short-term FD

P = ₹1,00,000 | R = 6.5% p.a. | T = 180 days

T = 180/365 = 0.493 years
SI = (1,00,000 × 6.5 × 0.493) / 100
SI = ₹3,205
Total = ₹1,03,205

Frequently Asked Questions

What is the formula for simple interest?
The formula for simple interest is SI = (P × R × T) / 100, where P is the principal amount, R is the annual interest rate in percent, and T is the time period in years. The total amount is A = P + SI. You can rearrange this formula to solve for any variable: P = SI × 100 / (R × T), R = SI × 100 / (P × T), and T = SI × 100 / (P × R).
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal throughout the loan or investment period, making interest grow in a straight line. Compound interest is calculated on the principal plus any previously accumulated interest, so interest compounds and grows exponentially. For ₹1,00,000 at 10% for 5 years: SI yields ₹50,000 in interest, while CI (compounded annually) yields ₹61,051 — a difference of ₹11,051.
How do I calculate SI for months?
To calculate SI for a period given in months, convert months to years by dividing by 12, then use SI = (P × R × T) / 100. For example, for 6 months at 10% per annum on ₹1,00,000: T = 6/12 = 0.5 years, SI = (1,00,000 × 10 × 0.5) / 100 = ₹5,000. This calculator handles the conversion automatically when you select "Months" from the time unit dropdown.
Which banks offer simple interest in India?
In India, simple interest is commonly applied to gold loans at NBFCs like Muthoot Finance and Manappuram Finance, personal loans offered at flat rates by cooperative banks, short-term FDs (under 1 year) at some banks, and certain rural credit schemes. Major banks including SBI, HDFC Bank, ICICI Bank, and Axis Bank apply simple interest to gold loans and some consumer finance products, while home loans and long-term FDs use compound interest.
Is simple interest good or bad for a borrower?
For a borrower, simple interest is generally more favorable than compound interest because the total interest payable is lower and predictable. Since SI is calculated only on the original principal and never on accumulated interest, borrowers end up paying less over the loan tenure. However, be cautious: a flat-rate loan at 12% per annum (SI) is actually more expensive than a reducing-balance loan at 12% because the effective interest rate on a flat-rate loan is roughly double the stated rate.
How is SI calculated on personal loans in India?
Most personal loans in India from mainstream banks use a reducing-balance (compound) method where the EMI reduces the principal each month. However, many cooperative banks, microfinance institutions, and NBFCs offer personal loans at a flat rate (simple interest on the full principal). On a flat-rate loan: SI = (P × R × T) / 100, and EMI = (P + SI) / Number of Months. Always compare the effective annual rate (EAR) rather than the flat rate to make an informed borrowing decision.
What is effective annual rate (EAR)?
The effective annual rate (EAR) is the actual yearly interest rate after accounting for the full effect of interest calculation over the year. For a simple interest loan, if the stated rate is 10% per annum on a 1-year loan, the EAR equals 10%. But for a 6-month loan at 10% p.a. (SI), the actual interest earned as a percentage of principal is 5%, which annualizes to 10% EAR. The EAR allows apples-to-apples comparison across different loan products and tenures.