What is Simple Interest?
Simple Interest (SI) is the interest calculated only on the original principal amount for the entire loan or investment period. It does not include interest on previously earned interest.
📌 Simple Interest Definition
Simple interest is a quick and easy method of calculating interest where the interest amount remains the same every year.
📐 Simple Interest Formula
The formula used to calculate simple interest is:
- P = Principal amount
- R = Rate of interest per year (%)
- T = Time (in years)
🧮 Simple Interest Example
Suppose you invest ₹10,000 at an interest rate of 5% per year for 3 years.
Simple Interest = ₹1,500
The total amount received after 3 years will be: ₹11,500
🏦 Where is Simple Interest Used?
- Personal loans (short-term)
- Car loans (some cases)
- Education loans (initial period)
- Fixed short-term investments
📊 Simple Interest vs Compound Interest
Unlike compound interest, simple interest does not earn interest on accumulated interest. Compound interest grows faster over time.
🧠 Advantages of Simple Interest
- Easy to calculate
- Transparent interest amount
- Lower total interest cost
⚠️ Disadvantages of Simple Interest
- No growth on earned interest
- Not suitable for long-term investments
🛠️ Calculate Simple Interest Online
Use our free calculator to instantly calculate simple interest.