How to use the Simple Interest Calculator
- Enter the principal, the original amount borrowed or deposited.
- Enter the yearly interest rate in percent.
- Enter the time in years. Convert months by dividing by 12, so 9 months is 0.75.
- Read the simple interest and the total amount to be paid or received.
Formula used
Simple interest = (P × R × T) ÷ 100, and total amount = P + SI, where P is the principal, R is the yearly rate in percent and T is the time in years.
Worked example
Here is the Simple Interest Calculator worked through with the example values shown above, so you can check each step by hand.
| Inputs | |
|---|---|
| Principal amount | ₹10,000 |
| Interest rate (per year) | 6 % |
| Time period | 3 years |
| Result | |
| Simple interest | ₹1,800 |
| Principal | ₹10,000 |
| Total amount | ₹11,800 |
Year-by-year interest
With simple interest the same amount is added every year, because interest is never charged on earlier interest.
| Year | Interest so far | Total amount |
|---|---|---|
| 1 | ₹600 | ₹10,600 |
| 2 | ₹1,200 | ₹11,200 |
| 3 | ₹1,800 | ₹11,800 |
The simple interest formula and an example
Simple interest = (P × R × T) ÷ 100, where P is the principal, R is the yearly rate in percent and T is the time in years. The total amount is P plus the interest. For ₹10,000 at 6% for 3 years, the interest is ₹1,800 and the total amount is ₹11,800. The interest is ₹600 every year, because it is always charged on the same ₹10,000.
You can rearrange the formula to find any missing value. The principal is SI × 100 ÷ (R × T), so ₹1,800 of interest at 6% over 3 years means a principal of ₹10,000. In the same way, R = SI × 100 ÷ (P × T) and T = SI × 100 ÷ (P × R).
Handling months and days
Time must be in years. For months, divide by 12. For days, many lenders divide by 365, although some use 360, so check which one applies to you. For example, ₹20,000 at 12% for 90 days is 20,000 × 12 × (90 ÷ 365) ÷ 100, which is about ₹591.78.
The calculator accepts decimals in the time field, so you can enter 0.25 for 3 months or 2.5 for 2 years and 6 months.
Simple versus compound interest
With simple interest the interest stays the same every year. With compound interest it grows. On ₹50,000 at 8% for 10 years, simple interest gives ₹40,000, for a total of ₹90,000. Compounded yearly, the total is ₹1,07,946. Over short periods the two are close, but over long periods compounding pulls well ahead.
Most bank deposits and many loans use compounding or reducing balances, so simple interest mainly appears in textbooks, informal loans and some short-term arrangements. Use the compound interest calculator when interest is added back to the balance.
Frequently asked questions
What is the formula for simple interest?
SI = (P × R × T) ÷ 100, where P is the principal, R is the yearly rate in percent and T is the time in years. The total amount is P + SI.
How do I calculate simple interest for months?
Divide the number of months by 12 to get years. For 6 months use 0.5 and for 9 months use 0.75. You can then use the normal formula.
How do I calculate simple interest for days?
Divide the number of days by 365 (some lenders use 360) to get years. For 90 days, T is about 0.2466 using 365 days.
How do I find the principal if I know the interest?
Use P = SI × 100 ÷ (R × T). For ₹1,800 interest at 6% over 3 years, P = 1,800 × 100 ÷ (6 × 3) = ₹10,000.
Is simple interest the same every year?
Yes. Because it is always calculated on the original principal, the interest for each year is the same. ₹10,000 at 6% earns ₹600 every year.
Do banks use simple interest?
Savings accounts, fixed deposits and most loans use compounding or a reducing balance rather than simple interest. Simple interest is used in some short-term loans and in many exam problems.
This calculator gives estimates for information only. Actual figures from a bank, employer, tax authority or doctor may differ. It is not financial, tax, legal or medical advice.