How this calculator works
- Step 1Start with the principal₹1,00,000.00Interest is always worked out on this original amount.
- Step 2Apply the yearly rate8%Each year earns the same rupee amount of interest.
- Step 3Multiply by the time₹24,000.00Interest for 3 years, added once at the end.
Simple interest, or SI, is interest charged or earned only on the original principal. Interest already earned does not earn more interest. The formula is SI = P × R × T ÷ 100, with R in percent a year and T in years.
Pick which value is unknown: interest, principal, rate or time. The calculator rearranges the same formula to find it. Switching the unknown keeps the last answer, so you can check a result backwards.
Worked example: the default loan
- Simple interest
SI = P × R × T ÷ 100- Total amount
A = P + SI
- Pprincipal ₹1,00,000.00
- Rrate, percent a year 8%
- Ttime in years 3
- Interest each year₹8,000.00
- Simple interest over the term₹24,000.00
- Total amount₹1,24,000.00
Working backwards gives the same numbers. Interest of ₹24,000.00 over 3 years at 8% needs a principal of ₹1,00,000.00.
On that principal, the same interest means a rate of 8% a year, or a time of 3 years at the default rate.
Months and days: the time convention
- 3 years₹24,000.00Years are used as entered.
- 18 months₹12,000.00Months ÷ 12, so 1.5 years.
- 90 days₹1,972.60Days ÷ 365, the actual/365 convention.
Days are divided by 365 in every year, including leap years. This is called actual/365, and it is the convention OpenStax uses for simple interest over days.
Some lenders divide by 360 instead, which gives slightly more interest. If your agreement names a different day-count, the result here will differ a little.
Simple versus compound interest
- Simple interest total
- Compound interest total (yearly)
Compound interest adds each year’s interest to the balance, so later years earn interest on interest. Simple interest grows by the same amount every year, in a straight line.
After one year the two are equal. For the default values over three years, compounding once a year adds ₹1,971.20. Over 20 years the gap grows to ₹2,06,095.71.
For part of a year, yearly compounding gives slightly less than simple interest. The calculator uses (1 + r) raised to the fractional time for that part-year.
Simple or compound?
Simple interest grows in a straight line. Most deposits and loans compound instead.
To see interest earned on interest, use the compound interest calculator. Bank deposits are covered by the FD calculator, and loans with monthly payments by the EMI calculator.
Common mistakes
Mistake: Entering months or days as if they were years.
Instead: Choose the matching time unit; the calculator converts it to years.
Mistake: Using a monthly rate in the yearly rate box.
Instead: Multiply a monthly rate by 12 before entering it.
Mistake: Entering the total repaid as the interest.
Instead: Subtract the principal first; interest excludes the amount lent.
Mistake: Assuming a loan or deposit uses simple interest.
Instead: Check the terms; many products compound, and some add fees.
Methodology and sources
Tests check every formula against period-by-period interest added up separately and against OpenStax worked solutions.
The formulas and the actual/365 day-count follow OpenStax Contemporary Mathematics, sections 6.3 and 6.4. Inverse answers are checked by solving the other way and getting back the starting values.
This is a learning and checking tool. It does not include fees, taxes or a lender’s own rounding. Source links, the review date and the financial disclaimer follow.
Read how we test our calculators, or browse more maths calculators.