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Calculates

Simple Interest Calculator

Calculate simple interest and the total amount on any principal.

Calculated & verified for mathematical accuracy·Reviewed by the Calculates Editorial Team

Loan or deposit

0 – 10,00,00,000

The sum borrowed or deposited at the start of the term.

0 – 40

Enter the flat rate as quoted — it is not comparable to a reducing-balance rate.

0 – 30

Nine months is 0.75. Interest is strictly proportional to this figure.

Compare against compounding

Total amount

₹2,72,000

₹2,00,000 principal plus ₹72,000 interest at a flat 9% over 4 years.

Simple interest
₹72,000
Interest per year
₹18,000
Principal
₹2,00,000
Interest on principal
36%
  • Principal₹2,00,000
  • Interest₹72,000

If this compounded instead

Simple interest
₹72,000.00
Compound interest (4 periods)
₹82,316.32
Difference
₹10,316.32
Total if compounded
₹2,82,316.32

Compounding charges interest on interest already accrued, so it pulls ahead of the flat line and keeps widening. Borrowers save that gap; lenders forgo it.

About this calculator

Simple interest charges the same amount every year because it is always worked out on the sum originally borrowed or deposited, never on interest already accrued. That makes it easy to verify by hand, and it is still how flat-rate vehicle loans, many informal advances and some short-term deposits are quoted. This page gives you the interest and the total repayable, then shows what the identical deal would cost or pay if it compounded instead.

How to use this calculator

  1. Enter the principal

    The sum actually handed over at the start — the loan advanced or the deposit placed. Any processing fee deducted up front is not part of this figure, though it does raise your real cost of borrowing.

  2. Enter the annual rate

    Use the flat rate as quoted. Be careful with vehicle and consumer loans: a rate advertised as flat is not comparable to a reducing-balance rate, and the flat number is roughly half as expensive as it sounds.

  3. Set the term in years

    Fractions are accepted, so a nine-month advance is 0.75. Because interest here is strictly proportional to time, halving the term halves the interest exactly.

  4. Read the compound comparison

    The panel beneath runs the same principal, rate and term through a compounding schedule. If you are lending, the gap is income you are giving up; if you are borrowing, it is money the flat structure saves you.

Formula

Simple interest: I = (P × R × T) / 100 Total amount: A = P + I Compound comparison: A = P × (1 + R / (100 × n)) ^ (n × T)
  • P is the principal — the original sum, which under this method never changes for the purpose of the calculation.
  • R is the annual rate written as a percentage rather than a decimal, so enter 9 rather than 0.09.
  • T is the term in years; a term in months must be divided by twelve before it goes into the formula.
  • n appears only in the comparison and is the number of times a compounding account would credit interest each year.
  • Interest accrued in any single year is always P × R / 100, identical in the first year and the last, which is what produces a straight line rather than a curve.
  • Over a term shorter than one compounding interval the simple figure is marginally the higher of the two, because the compound account has not yet made its first credit.

Worked example

Inputs

  • Principal (P): ₹2,00,000
  • Annual rate (R): 9%
  • Term (T): 4 years
  • Comparison compounding: Annual

Calculation

I = (200000 × 9 × 4) / 100 = 7200000 / 100 = 72,000 A = 200000 + 72000 = 2,72,000 Each year accrues 200000 × 9 / 100 = 18,000 Year 1: 18,000 Year 3: 18,000 Year 2: 18,000 Year 4: 18,000 Same deal compounded annually: A = 200000 × 1.09^4 = 2,82,316.32 Interest = 82,316.32

The borrower repays ₹2,72,000, of which ₹72,000 is interest accruing at a flat ₹18,000 a year. Had the same loan compounded annually the interest would have been ₹82,316.32 — ₹10,316.32 more — because each year would have charged interest on the interest already outstanding.

What the result means

  • The total amount is everything owed at the end of the term under this structure. On a flat-rate loan repaid in instalments you pay towards this total monthly, but the total itself is fixed on day one and does not shrink as you repay.
  • Interest per year is constant, which is the practical signature of simple interest. If a lender quotes you a figure that rises year on year, the deal is compounding regardless of what it is called.
  • The compound difference is the cost of reinvestment. As a depositor you are forgoing that amount by taking payouts in cash instead of letting them ride; as a borrower you are avoiding it.
  • A flat rate is not comparable to a reducing-balance rate on a loan. Because your outstanding balance falls with every instalment while the flat charge does not, a 9% flat loan works out close to a 16% reducing-balance loan over four years.

Related calculations

  • Raise the compounding frequency from annual to monthly while leaving everything else alone to see how much of the gap is caused by the crediting schedule alone.
  • Shorten the term below one year to find the crossover point where simple interest is briefly the better payer of the two.
  • Take the total amount and divide it by the number of monthly instalments to approximate the EMI a flat-rate loan would carry.

Frequently asked questions

Where is simple interest actually used?

It turns up wherever the arithmetic needs to be verifiable without a spreadsheet: flat-rate car and two-wheeler loans, gold loans, short-term personal advances between individuals, some corporate fixed deposits that pay interest out rather than reinvesting it, and most statutory interest on delayed payments. Savings accounts, credit cards and cumulative deposits all compound instead.

How do I convert a term given in months or days?

Divide by twelve for months and by 365 for days before entering the figure. A 90-day advance is 90 ÷ 365 = 0.2466 years, and a 30-month loan is 2.5 years. Lenders using an exact day-count convention may land a few rupees away from this because they count actual calendar days rather than treating every month as a twelfth of a year.

Is a 10% flat rate the same as a 10% reducing-balance rate?

No, and the difference is large enough to change which loan you should take. A flat rate charges interest on the entire original amount for the whole term even though you have repaid much of it, whereas a reducing-balance rate charges only on what is still outstanding. As a rough guide, a flat rate works out to somewhere near twice the equivalent reducing-balance rate over a multi-year term, so always ask which basis a quote uses.

Why would anyone choose simple interest over compound interest?

A borrower prefers it because it caps what they owe: the charge stops growing once the principal is fixed, so a missed month does not snowball. A depositor might accept it when they need the income paid out as cash rather than locked back into the deposit, which is the whole point of a non-cumulative fixed deposit. The structure suits anyone who values a predictable, flat obligation over an optimised one.

Can the simple interest figure ever beat the compound one?

Briefly, yes. Over any term shorter than a single compounding interval the compound account has not yet credited anything, so its value follows a curve that sits just below the straight line of simple accrual. At 8% over three months with annual compounding, simple interest pays 2% while compounding pays 1.94%. From the first credit onwards compounding pulls ahead permanently.

Does the calculator account for tax on the interest?

No, every figure here is before tax. Interest income in India is generally taxable at your slab rate in the year it accrues, and payers deduct TDS once the amount crosses the applicable threshold. If you are comparing a deposit against a loan you are considering prepaying, run both numbers post-tax, because the comparison can flip once the tax on the interest income is taken out.

What happens to simple interest if I repay early?

It depends on the contract rather than the formula. Some lenders recalculate the interest for the shorter period actually used, which saves you money in direct proportion to the time cut. Others treat the total as fixed at the outset and charge a foreclosure fee instead, leaving you no better off. Recalculate with a reduced term here to find the saving you should be asking for.

How do I work out the rate if I only know the interest and principal?

Rearrange the formula to R = (I × 100) ÷ (P × T). If ₹72,000 of interest accrued on ₹2,00,000 over four years, the rate is (72000 × 100) ÷ (200000 × 4) = 9%. The same rearrangement works for any missing variable, so you can also solve for the term with T = (I × 100) ÷ (P × R) when you know what you were charged but not how long the lender assumed.

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