Home
Back
Simple Interest Formula:
| From: | To: |
Simple interest is a method of calculating interest on a loan or investment where the interest is calculated only on the principal amount. It does not compound, meaning interest is not earned on previously accumulated interest.
The calculator uses the simple interest formula:
Where:
Explanation: The formula calculates the interest by multiplying the principal amount with the annual interest rate (converted to decimal) and the time period in years.
Details: Accurate interest calculation is crucial for financial planning, loan repayment estimation, and investment returns analysis. It helps borrowers understand the true cost of borrowing and helps investors calculate potential returns.
Tips: Enter principal amount in Indian Rupees, annual interest rate in percentage, and time period in years. All values must be positive numbers.
Q1: What's the difference between simple interest and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on both the principal and accumulated interest from previous periods.
Q2: When is simple interest typically used?
A: Simple interest is commonly used for short-term loans, car loans, and some personal loans where the interest doesn't compound.
Q3: How do I convert annual interest rate to decimal?
A: Divide the percentage rate by 100. For example, 8% becomes 0.08 in decimal form.
Q4: Can I use this calculator for monthly calculations?
A: Yes, but you need to convert months to years. For example, 6 months = 0.5 years, 18 months = 1.5 years.
Q5: Is this calculator suitable for all types of loans?
A: This calculator is specifically designed for simple interest loans. For compound interest loans or loans with additional fees, a different calculation method is required.