Simple Interest Calculator
Understanding Simple Interest – Formula, Examples & Calculator Guide
When it comes to borrowing money or investing your savings, the concept of Simple Interest (SI) plays a vital role. Knowing how to calculate it can save you from confusion and help you make better financial decisions. In this guide, we explain what simple interest is, the formula, real-life examples, and how to use a simple interest calculator for quick results.
What is Simple Interest?
Simple Interest is the extra money paid or earned on the principal amount (original sum) for a fixed period of time at a fixed rate. Unlike compound interest, which grows over time, simple interest is straightforward — you only pay or earn interest on the original principal. For example, when you use a simple interest loan calculator, the interest amount remains the same each year.
Simple Interest Formula
The formula is:
SI = (P × R × T) / 100
- P = Principal amount
- R = Rate of Interest (% per annum)
- T = Time (in years)
If you don’t want to calculate manually, just use this Simple Interest Calculator to get instant results.
Frequently Asked Questions (FAQ)
What is Simple Interest?
Simple Interest (SI) is a method of calculating the interest on a principal amount for a fixed period of time at a fixed rate. It does not compound, which makes it easy to calculate.
What is the formula of Simple Interest?
The formula is: SI = (P × R × T) / 100, where P = Principal, R = Rate of Interest, and T = Time in years.
Where is Simple Interest used in real life?
Simple Interest is commonly used in short-term loans, education loans, savings schemes, and fixed deposits where compounding is not applied.
Is Simple Interest better than Compound Interest?
Simple Interest is easier to calculate and benefits borrowers in short-term loans. However, Compound Interest generally offers higher returns for investors in the long run.