Simple Interest Calculator
Enter principal amount, annual interest rate, and time in years to compute simple interest and total payoff.
Enter principal amount, annual interest rate, and time in years to compute simple interest and total payoff.
A principal of 5,000 at 6 percent for 3 years.
Interest 900, total repayable 5,900.
The same 10,000 at 5 percent a year, held for different lengths of time. Simple interest is this tool’s formula, principal × rate × time. The compound column applies the rate once a year to the running balance.
| Years | Simple total | Compound total | Difference |
|---|---|---|---|
| 1 | 10,500.00 | 10,500.00 | 0.00 |
| 5 | 12,500.00 | 12,762.82 | 262.82 |
| 10 | 15,000.00 | 16,288.95 | 1,288.95 |
| 20 | 20,000.00 | 26,532.98 | 6,532.98 |
| 30 | 25,000.00 | 43,219.42 | 18,219.42 |
Over one year the two are identical, because there has been no interest to compound yet. The gap then grows faster than the term does — tripling the term from 10 to 30 years multiplies the difference by more than fourteen.
That is the entire difference from compound interest, and it grows into a large gap over time. The example earns exactly 300 a year, every year, because the calculation always uses the original 5,000. Compounded annually at the same rate, the same principal would earn about 955 over three years and the gap would widen every year after that. Over three years the difference is minor; over twenty it is the dominant factor.
It is the convention for many short-term instruments — certain personal and car loans, some bonds between coupon dates, and most late-payment or statutory interest terms. Anywhere a rate is quoted per period on a fixed principal that does not roll up, this is the right calculation. Savings accounts and credit cards are almost never simple interest, so do not use this to model either.
Because the formula is linear in time, a partial period needs no special handling: nine months is 0.75 and 30 days is roughly 0.0822. Half the time is exactly half the interest, which is not true under compounding.
The results are labelled with a rupee symbol regardless of what currency you have in mind. The arithmetic is currency-neutral — it is pure multiplication — so the numbers are correct for any currency; only the symbol is fixed.
Interest charged only on the original principal, never on interest already accrued. It grows in a straight line: the same amount is added every period for as long as the arrangement runs.
Compound interest is calculated on the principal plus everything accumulated so far, so each period starts from a larger base and the total accelerates. Simple interest keeps the base fixed. On 5,000 at 6 percent for three years the difference is 900 against about 955; stretch it to twenty years and it becomes 6,000 against roughly 11,036.
Yes. Enter the time as a decimal fraction of a year — six months is 0.5, ninety days is about 0.25. The formula is linear in time, so partial periods are exact rather than approximate.
Rearrange: Rate = Interest × 100 ÷ (Principal × Time). If 900 of interest was charged on 5,000 over three years, that is 900 × 100 ÷ 15,000 = 6 percent.
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