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Simple Interest Calculator

Calculate linear interest on principal deposits, consumer loans, and promissory bonds.

₹

Starting principal balance

%

Nominal rate per annum

Years

Duration of interest calculation

Simple vs Compound Interest

Simple interest grows linearly every year without interest-on-interest. Over 5 years at 7.5%, compounding would generate an extra ₹6,063.

Results

Maturity Value
₹1,37,500
Initial Principal₹1,00,000
Total Simple Interest₹37,500
Compounded Equivalent₹1,43,563
Compounding Advantage+₹6,063

Calculated via standard SI formula: (P × R × T) / 100.

How simple interest is calculated

Simple interest is determined solely by multiplying the daily or annual rate by the original principal:

SI = (P × R × T) / 100

  • SI — Simple Interest earned or owed
  • P — Principal investment or borrowed loan
  • R — Annual nominal percentage rate
  • T — Time period in years
  • Total Maturity = P + SI

Worked Example

Consider a principal of ₹1,00,000 deposited at an annual rate of 7.5% for 5 years:

SI = (1,00,000 × 7.5 × 5) / 100 = ₹37,500

Total Maturity Value = ₹1,00,000 + ₹37,500 = ₹1,37,500. Over the same period with annual compounding, the investment would grow to ₹1,43,563, giving a compounding advantage of +₹6,063.

Comparing flat interest against compound yield?Read our guide on APR vs. APY: How Compounding Frequency Affects Effective Returns to understand why lenders quote flat simple interest while investment accounts quote compound APY.

Frequently asked questions

Where is simple interest typically used in banking?
Simple interest is commonly used for short-term personal loans, car loans, auto financing, installment loans, and certificates of deposit where interest is paid out periodically rather than reinvested into the principal.
What is the formula for simple interest?
The formula is SI = (P × R × T) / 100. P is principal, R is annual rate, and T is tenure in years. Total maturity value is P + SI.
Why do savings accounts use compound interest instead?
Compound interest incentivizes long-term saving because earned interest remains in the account and generates additional interest in subsequent compounding periods (monthly or quarterly), rapidly compounding wealth.

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Maturity Value

₹1,37,500