Simple Interest Calculator
Calculate simple interest on any principal amount. See how your money grows year by year with a fixed interest rate.
Last updated: 2026-03-28
Found an error?
Help us keep calculations accurate. Report any issues you find.
Important: This calculator provides estimates based on the inputs and assumptions you provide. Results are mathematical projections, not financial advice or recommendations. Actual outcomes will vary based on market conditions, policy changes, individual circumstances, and factors not captured by this tool. Verify all figures independently and consult qualified professionals before making financial decisions.
How Simple Interest Works
Simple interest is a method of calculating interest where the interest is computed only on the original principal amount throughout the investment or loan period. Unlike compound interest, earned interest does not get added back to the principal.
Simple Interest Formula
The formula is straightforward:
- Simple Interest (SI) = P × R × T ÷ 100
- Total Amount (A) = P + SI
Where P = Principal, R = Annual interest rate (%), T = Time in years.
Worked Example
If you invest ₹1,00,000 at 7% for 5 years:
SI = 1,00,000 × 7 × 5 ÷ 100 = ₹35,000
Total Amount = ₹1,00,000 + ₹35,000 = ₹1,35,000
Simple Interest vs Compound Interest
The same ₹1,00,000 at 7% compounded annually for 5 years would grow to ₹1,40,255 — that's ₹5,255 more than simple interest. The difference grows dramatically over longer periods. At 20 years, simple interest gives ₹2,40,000 while compound interest gives ₹3,86,968.
When Is Simple Interest Used?
- Short-term personal loans and car loans
- Some non-cumulative fixed deposits (interest paid out periodically)
- Treasury bills and some government securities
- Invoice discounting and trade finance
Frequently Asked Questions
What is the formula for simple interest?
Simple Interest = (Principal × Rate × Time) / 100. The total amount at maturity is Principal + Simple Interest.
How is simple interest different from compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus previously earned interest, leading to higher returns over time.
Where is simple interest used in India?
Simple interest is commonly used for short-term loans, personal loans, car loans, and some fixed deposits for shorter tenures. Most savings instruments like PPF, FDs, and recurring deposits use compound interest.
Can simple interest be applied monthly?
While the formula uses annual periods, you can calculate monthly simple interest by dividing the annual rate by 12 and using months instead of years in the formula.
Is FD interest simple or compound?
Most banks pay compound interest on FDs. However, some banks offer a ‘simple interest’ option for non-cumulative FDs where interest is paid out periodically rather than reinvested.
Related Resources
Calculators
- Compound Interest — Calculate compound interest with yearly, half-yearly, quarterly, or monthly compounding. See the power of compounding with year-by-year growth chart.
- CAGR — Calculate CAGR on any investment. Find the true annualised return rate for mutual funds, stocks, real estate, or any asset class.
Disclaimer
This calculator is for educational purposes only and does not constitute financial advice. Actual interest rates and terms vary by institution. Consult your bank or financial advisor for specific loan or deposit terms.