Simple Interest Calculator
Calculate simple interest on your principal amount. See the total interest earned and maturity value with a year-by-year breakdown.
Principal
₹1,00,000
Total Interest
₹40,000
Maturity Value
₹1,40,000
Formula
SI = ₹1,00,000 × 8% × 5 = ₹40,000
Growth Over Time
₹1,40,000
| Year | Principal | Interest |
|---|---|---|
| 1 | ₹1,00,000 | ₹8,000 |
| 2 | ₹1,00,000 | ₹16,000 |
| 3 | ₹1,00,000 | ₹24,000 |
| 4 | ₹1,00,000 | ₹32,000 |
| 5 | ₹1,00,000 | ₹40,000 |
| Year | Principal | Interest | Total Value |
|---|---|---|---|
| 1 | ₹1,00,000 | ₹8,000 | ₹1,08,000 |
| 2 | ₹1,00,000 | ₹16,000 | ₹1,16,000 |
| 3 | ₹1,00,000 | ₹24,000 | ₹1,24,000 |
| 4 | ₹1,00,000 | ₹32,000 | ₹1,32,000 |
| 5 | ₹1,00,000 | ₹40,000 | ₹1,40,000 |
What is Simple Interest?
Simple interest is interest calculated only on the original principal amount. Unlike compound interest, it does not earn interest on previously accumulated interest. Simple interest is commonly used for short-term loans, car loans, and some savings instruments.
Simple Interest Formula
The formula for simple interest is:
SI = P × R × T / 100
- P (Principal) — The initial amount invested or borrowed
- R (Rate) — Annual interest rate in percentage
- T (Time) — Duration in years
The maturity value (total amount) = Principal + Simple Interest
Simple Interest vs Compound Interest
- Simple Interest: Interest is calculated only on the principal. Growth is linear. Better for borrowers.
- Compound Interest: Interest is calculated on principal + accumulated interest. Growth is exponential. Better for investors.
For example, ₹1,00,000 at 8% for 5 years: Simple interest = ₹40,000, Compound interest (yearly) = ₹46,933. The difference grows significantly over longer periods.
FAQ: Where is simple interest used?
Simple interest is used in car loans, short-term personal loans, Treasury bills, and some savings certificates. Banks typically use compound interest for deposits, while some government schemes and informal lending use simple interest.
FAQ: Can simple interest be negative?
The interest rate is always positive, so simple interest cannot be negative. However, in real terms (adjusted for inflation), the effective return can be negative if the interest rate is lower than the inflation rate.