1. What is Simple Interest for Payday Loans?

Simple interest is a straightforward method of calculating interest charges on payday loans. It's calculated only on the principal amount, without compounding, making it easier to understand the total cost of borrowing.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal loan amount (INR)
• \( R \) — Annual interest rate (%)
• \( T \) — Time period (years or fraction of year)

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

3. Importance of Interest Calculation

Details: Understanding interest calculations helps borrowers make informed decisions about payday loans, compare different loan offers, and plan for repayment to avoid financial strain.

4. Using the Calculator

Tips: Enter the principal amount in INR, annual interest rate as a percentage, and time period in years (use decimal values for partial years). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Are payday loans legal in India?
A: Payday loans are not specifically regulated in India, but many digital lenders offer short-term loans with varying interest rates and terms.

Q2: What are typical interest rates for payday loans in India?
A: Interest rates can vary widely, typically ranging from 1-2% per month (12-24% annually), but some lenders may charge higher rates.

Q3: How is time calculated for partial years?
A: For periods less than a year, convert days to years by dividing by 365 (e.g., 30 days = 30/365 ≈ 0.082 years).

Q4: Are there any hidden charges with payday loans?
A: Some lenders may charge processing fees, late payment fees, or other charges. Always read the terms carefully before borrowing.

Q5: What happens if I can't repay on time?
A: Late payments typically incur additional fees and higher interest rates. Repeated defaults can negatively impact your credit score and lead to legal action.