1. What is Simple Interest?

Simple interest is a method of calculating interest charged on a loan or paid on an investment. It is calculated only on the principal amount, without compounding over time.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (currency)
• \( R \) — Annual interest rate (%)
• \( T \) — Time period (years)

Explanation: The formula calculates the interest amount based on the original principal, without considering any accumulated interest from previous periods.

3. Importance of Interest Calculation

Details: Understanding interest calculations is crucial for borrowers to know the true cost of loans and for investors to calculate potential returns on their investments.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple 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.

Q2: How is time typically measured for payday loans?
A: For short-term payday loans, time is often measured in days or weeks, which should be converted to years (e.g., 30 days = 30/365 years).

Q3: Are there legal limits on payday loan interest rates?
A: Yes, most jurisdictions have regulations limiting the maximum interest rates that can be charged on payday loans to protect consumers.

Q4: Can this calculator be used for other types of loans?
A: While designed for payday loans, this calculator can be used for any loan that uses simple interest calculation.

Q5: How accurate is simple interest calculation for payday loans?
A: Simple interest provides a straightforward calculation, but borrowers should be aware of any additional fees or charges that may apply.