How to use the Simple Interest Calculator
- Enter the principal — the amount lent, borrowed or deposited.
- Enter the interest rate per year.
- Enter the time in years and months.
Formula
SI = P × R × T ÷ 100
- P:
- principal
- R:
- rate of interest per year (%)
- T:
- time in years
The formula
Simple interest = P × R × T ÷ 100
Total amount = P + Simple interest
P is the principal, R the rate per year and T the time in years. For months, divide by 12: 9 months is 0.75 years.
Simple vs compound interest
Simple interest is always calculated on the original principal. Compound interest is calculated on the principal plus interest already earned, so it grows faster over time.
| Years | Simple interest | Compound interest (yearly) |
|---|---|---|
| 3 | ₹24,000 | ₹25,971 |
Most bank deposits and loans use compound interest or reducing-balance methods. Simple interest is common in informal lending, some short-term loans and school maths. For deposits, try the Compound Interest Calculator.
Worked examples
₹1,00,000 at 8% for 3 years
- SI = 1,00,000 × 8 × 3 ÷ 100
Interest ₹24,000; total ₹1,24,000
₹25,000 at 10% for 9 months
- T = 9 ÷ 12 = 0.75
- SI = 25,000 × 10 × 0.75 ÷ 100
Interest ₹1,875; total ₹26,875
Important notes
- Some lenders quote a monthly rate (for example, 2% a month). Convert it to a yearly rate (24%) before using the formula.
Frequently asked questions
How do I calculate simple interest per month?
Divide the yearly rate by 12 and multiply by the principal. At 12% a year, interest on ₹1,00,000 is ₹1,000 a month.
How do I find the rate if I know the interest?
Rate = SI × 100 ÷ (P × T). If ₹50,000 earned ₹6,000 in 2 years, the rate is 6,000 × 100 ÷ (50,000 × 2) = 6%.
Is a flat-rate loan the same as simple interest?
Yes. A flat rate charges interest on the full original loan for the whole tenure — which costs much more than the same rate on a reducing balance.