1. What is Simple Interest?

Simple interest is a method of calculating interest on a loan where the interest is calculated only on the principal amount. It does not compound, meaning interest is not charged on previously accumulated interest.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Total interest paid (₹ or currency)
• \( P \) — Principal loan amount (₹ or currency)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period in years

Explanation: The formula calculates the total interest you'll pay over the life of the car loan based on the initial principal amount, annual interest rate, and loan duration.

3. Importance of Interest Calculation

Details: Understanding the total interest cost helps borrowers make informed decisions about loan terms, compare different loan offers, and budget for the true cost of vehicle ownership.

4. Using the Calculator

Tips: Enter the principal loan amount in ₹, annual interest rate as a percentage, and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is simple interest common for car loans?
A: Most car loans use simple interest, which means interest is calculated daily on the current principal balance.

Q2: How does this differ from compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest calculates interest on both principal and accumulated interest.

Q3: Can I reduce the total interest paid?
A: Yes, by making larger down payments, choosing a shorter loan term, or making extra payments toward principal.

Q4: Are there other costs not included in this calculation?
A: This calculator shows only interest costs. Additional costs may include origination fees, insurance, and taxes.

Q5: Should I use this for other types of loans?
A: This calculator is designed for simple interest car loans. Other loan types may use different interest calculation methods.