Simple Interest Calculator
Work out the simple interest and final amount on any deposit or loan in seconds.
What is simple interest?
Simple interest is the most basic way of charging or earning interest on money. It is calculated only on the original amount you invest or borrow, known as the principal. Unlike compound interest, it never earns interest on interest, so the amount added each year stays exactly the same.
The simple interest formula
The formula used by this calculator is:
SI = P × R × T ÷ 100
and the maturity amount is:
A = P + SI
Pis the principal, the money you invest or borrow.Ris the annual rate of interest as a percentage.Tis the time period in years.
A worked example
Suppose you invest ₹1,00,000 at 8% per annum for 5 years. The simple interest is 1,00,000 × 8 × 5 ÷ 100 = ₹40,000. Your total amount at the end is ₹1,00,000 + ₹40,000 = ₹1,40,000.
Simple vs compound interest over time
For a single year the two methods give an identical result. The gap only opens up from the second year onwards, when compound interest starts charging interest on the interest already earned. The table below follows the same ₹1,00,000 at 8% per annum under both methods, with annual compounding.
| Time | Simple interest total | Compound interest total | Extra from compounding |
|---|---|---|---|
| 1 year | ₹1,08,000 | ₹1,08,000 | ₹0 |
| 5 years | ₹1,40,000 | ₹1,46,933 | ₹6,933 |
| 10 years | ₹1,80,000 | ₹2,15,892 | ₹35,892 |
| 20 years | ₹2,60,000 | ₹4,66,096 | ₹2,06,096 |
| 30 years | ₹3,40,000 | ₹10,06,266 | ₹6,66,266 |
By year five the difference is under ₹7,000, but by year thirty compounding has generated almost four times as much interest as the simple-interest method. That is why simple interest is fine for comparing a short loan, yet a poor guide to long-term savings — for anything beyond a few years reach for the compound interest calculator or the CAGR calculator.
The flat-rate trap: why 10% flat is not 10%
This is the single most important thing an Indian borrower should understand about simple interest. Many car dealers, two-wheeler financiers, consumer-durable schemes and some NBFCs quote a flat rate. A flat rate applies simple interest to the full original loan amount for the entire tenure — even though you are steadily paying the principal down every single month.
A normal bank loan works on the reducing balance instead: as your outstanding principal falls, the interest portion of each EMI falls with it. A flat rate ignores this completely, so it always costs far more than it first appears to.
Worked example: flat vs reducing
Say you borrow ₹5,00,000 for 3 years. At a flat 10% the interest is 5,00,000 × 10 × 3 ÷ 100 = ₹1,50,000, so you repay ₹6,50,000 in 36 equal instalments of about ₹18,056. Now find the reducing-balance rate that produces the same EMI on the same loan and it works out to roughly 18% per annum — close to 1.8 times the rate you were quoted.
Whenever a lender quotes a flat rate, convert it to its reducing-rate equivalent before you compare offers. Our EMI calculator and car loan calculator both use the reducing-balance method that banks actually charge, which gives you a fair basis for comparison.
Where simple interest genuinely applies
Despite the flat-rate trap, simple interest is the correct model in several real situations:
- Short-term and gold loans: many personal loans, gold loans and informal lending between family or friends run on plain simple interest.
- Non-cumulative deposits: some fixed deposits, company deposits and bonds pay interest out monthly, quarterly or yearly rather than reinvesting it, so the return is effectively simple interest.
- Interest on delayed payments: penal interest on late tax, statutory dues and many arrears is worked out on a simple-interest basis.
- Exam and textbook maths: SSC, banking and school arithmetic problems overwhelmingly use simple interest because it can be solved by hand.
It is also worth remembering that whether the total amount is good or bad for you depends on your side of the deal. On a deposit, simple interest that pays out means you can invest each payout elsewhere; on a loan, simple interest charged flat on the whole principal quietly works in the lender's favour, so always read the fine print.
Worked example: a monthly-payout deposit
Suppose a retiree places ₹10,00,000 in a non-cumulative fixed deposit at, say, 7.5% per annum with the interest paid out every month. The annual simple interest is 10,00,000 × 7.5 ÷ 100 = ₹75,000, which the bank credits as roughly ₹6,250 each month. Over a five-year term that is ₹3,75,000 of interest received in cash, with the original ₹10,00,000 returned at maturity. Because each payout leaves the deposit rather than being reinvested, the return stays exactly at the simple-interest figure — it is the choice to reinvest every payout that would turn this into compounding and lift the eventual total. This is why a monthly-income FD and a cumulative FD at the same headline rate leave you with different amounts.
How to use this calculator
- Enter the principal amount you plan to invest or borrow.
- Set the annual interest rate in percent.
- Choose the time period in years.
The calculator instantly shows your total interest and the final maturity amount, along with a chart splitting principal from interest.