Calculate simple interest on a deposit or loan. Simple interest is charged only on the original principal, so it grows in a straight line rather than compounding.
The principal is multiplied by the annual rate and the number of years.
Dividing by 100 converts the percentage into a decimal.
Because interest is always charged on the original principal, doubling the time exactly doubles the interest.
Simple interest: SI = P × R × T ÷ 100
Total amount: A = P + SI
P, R, T: Principal, annual rate %, time in years
What is the difference between simple and compound interest?
Simple interest is always worked out on the original amount. Compound interest is worked out on the original amount plus interest already added, so it grows faster. Over a long time, this difference becomes very large.
Where is simple interest actually used in India?
It is mostly used in short-term loans, some car and personal loans that use a flat rate, and some fixed deposits that pay out interest instead of adding it back. Most savings products use compound interest instead.
Is a flat interest rate the same as simple interest?
Yes, more or less. This is why flat rates can be confusing for loans. A flat 10% loan costs much more than a 10% reducing-balance loan, because you keep paying interest on the full original amount, even after you have paid back most of it.