Home
Back
Simple Interest Formula:
| From: | To: |
Simple interest is a method of calculating interest on a principal amount based on a fixed annual rate over a specific time period. It is commonly used for short-term loans and investments where interest is not compounded.
The calculator uses the simple interest formula:
Where:
Explanation: The formula calculates the interest earned or paid by multiplying the principal by the annual interest rate and time period, then dividing by 100 to convert the percentage rate.
Details: Simple interest calculations are essential for financial planning, loan repayment estimation, investment return calculations, and understanding the cost of borrowing money.
Tips: Enter the principal amount in currency, annual interest rate as a 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, personal loans, and some types of savings accounts and investments.
Q3: How does time affect simple interest calculations?
A: Interest increases linearly with time - the longer the time period, the more interest will be earned or paid, assuming the same principal and rate.
Q4: Can simple interest be calculated for partial years?
A: Yes, time can be entered as a fraction of a year (e.g., 0.5 for 6 months, 0.25 for 3 months).
Q5: Is this calculator suitable for all currencies?
A: Yes, the calculator works with any currency as long as the principal and interest are expressed in the same currency units.