Home
Back
Simple Interest Formula:
| From: | To: |
Simple interest is a quick method of calculating the interest charge on a loan or investment. It is calculated only on the principal amount, without considering any previously earned interest.
The calculator uses the simple interest formula with exact days:
Where:
Explanation: This formula calculates interest based on the exact number of days, using 365 days per year as the basis for daily interest calculation.
Details: Accurate interest calculation is crucial for financial planning, loan repayment estimation, investment return analysis, and understanding the true cost of borrowing.
Tips: Enter the principal amount in currency units, annual interest rate as a percentage, and the time period in days. All values must be valid (principal > 0, rate ≥ 0, days > 0).
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 the principal plus any accumulated interest.
Q2: Why use 365 days instead of 360?
A: Using 365 days provides a more accurate calculation for exact day counts, especially for periods that don't align with whole months.
Q3: Can this calculator be used for loans and investments?
A: Yes, the same formula applies to both loan interest calculations and investment earnings when using simple interest.
Q4: How does this differ from bank interest calculations?
A: Some financial institutions may use different day count conventions (like 360 days) or compounding methods, so always check with your institution for their specific calculation method.
Q5: Is simple interest commonly used in real financial products?
A: Simple interest is typically used for short-term loans, some types of bonds, and in situations where compounding doesn't occur.