Simple Interest Calculator calculates interest accrued on a principal amount over a fixed period, based on a predetermined interest rate. It provides users with the total amount payable, comprising the original principal and the accrued interest.
Simple Interest is the method to calculate the interest where we only take the principal amount each time without changing it with respect to the interest earned in the previous cycle.
What is Simple Interest ?
Simple interest is a method of calculating interest on a principal amount over a set period, where the interest is constant and not compounded. It is calculated by multiplying the principal amount, interest rate, and period divided by 100. Simple interest is commonly used for short-term loans and financial instruments with fixed interest rates.
Simple Interest Formula
How to Calculate Simple Interest ?
The simple interest formula ( I = P * R *T / 100 ) calculates the interest earned or paid on a principal amount over a specific time period. Here, ( I ) is the interest, ( P ) is the principal amount, ( R ) is the interest rate per time period, and ( T ) is the time duration. It’s commonly utilized in financial contexts to determine interest on loans, deposits, or investments where interest is calculated linearly, without compounding.
Example:
Let’s say Rahul borrows ₹10,000 from Priya at a simple interest rate of 8% per annum. Using the simple interest formula ( I = P * R *T ) where P is the principal amount, R is the interest rate, and T is the time in years, we can calculate the interest. If Rahul repays the loan after 2 years, the interest would be:
I = P * R *T we are representing the 8% interest rate in decimal form I = (10,000 × 8 × 2) / 100 = ₹1,600 So, Rahul would have to pay ₹1,600 as interest on the loan.
How To calculate Total Maturity Amount Value
The formula A = P(1 + RT) represents the total amount A accumulated over time T with principal amount P and interest rate R.
Example:
Given:
P = ₹10,000 (principal)
R = 5% (interest rate)
T = 3 years (time)
Substitute the values into the formula
A = 10,000(1 + (5 / 100) * 3)
Calculate the interest
A = 10,000(1 + 0.15)
Add 1 and 0.15
A = 10,000(1.15)
Multiply
A = ₹11,500
So, the total amount A is ₹11,500.
Advantages of using Simple Interest Calculators
- Unit Flexibility: Online calculators compute SI regardless of currency, ensuring accurate results.
- Time Efficiency: Users save time by swiftly calculating interest for varying durations.
- Comprehensive Insights: Access to multiple variables aids in assessing total investment, enabling informed decisions.
- Future Planning: Helps in determining present and future monetary value, enhancing financial foresight and planning.