Simple Interest Calculator

Be it loans or investments, one crucial aspect affecting our financial decisions is interest. Interests are of two kinds; simple interest and compound interest.

This guide focuses on simple interest calculator. Here, we'll talk about:

• What is simple interest?
• How is simple interest calculated?
• How do simple interest calculators in India work?
• How simple interest calculators can help in effective financial planning?

What is Simple interest?

Simple interest involves calculating interest on a specific amount without factoring in compounding. It involves determining the interest amount based on a predetermined interest rate for a specific tenure. Simple interest is the interest charged when the principal amount doesn't change.

Every time the interest for a tenure (can be monthly, quarterly or half-yearly) is calculated, it is done on the same amount.

In compound interest, interest is added to the principal amount, and the sum of both becomes the new principal. Simply put, it is interest on interest. But in simple interest, interest is not added to the principal amount to calculate the new principal amount. Rather, the interest amount is computed on the same principal amount each year.

For example, let's say you took a loan for ₹ 1,00,000 at a 10% interest rate (simple interest) for 3 years. It would be easy to calculate the interest charges for 3 years.

You'll calculate 10% on ₹ 1,00,000 for one year. So, you'll pay ₹10,000 as interest in the first year. For the second and third years, your interest obligation remains the same. Your total interest, therefore, would be ₹30,000. (₹ 1,00,000 x 10% x 3 = ₹30,000 )

To make it easier, simple interest calculators in India can be used to calculate simple interest online. We'll talk about these in a later section.

What is a simple interest calculator?

A simple interest calculator is a tool used for calculating interest on loans or investments. These tools calculate interests that don't compound.

A simple interest calculator helps to calculate simple interest online on loans on a daily, monthly, quarterly, half-yearly or yearly basis.

The calculator allows you to fill in the information and calculate the interest payable. You just have to enter the principal amount, interest rates, and tenure. On pressing enter, the simple interest calculator will show the interest amount to be paid. Simple interest calculators on loans are reliable, quick and easy to use. 

Monthly interest calculators also help in calculating monthly returns on investments.

How does a simple interest calculator work?

The working of a simple interest calculator is quick and easy. The inputs entered in the formula box generate results based on a simple formula.

The simple interest formula is: A = P (1+rt)

Here A= Final amount, P= Principal amount, R= Interest Rate, and T= Tenure.

Principal Amount: It is the amount borrowed from a lender or invested. It is usually denoted by P.

Interest Rate: The interest rate, denoted as R, refers to the rate of interest at which funds are borrowed or the rate of interest earned on investments.

Tenure: It is the period for which money is invested or borrowed. It is denoted by T

Formula for Simple Interest Calculator

The formula for calculating simple interest using a Simple Interest Calculator is:

Simple Interest (SI) = Principal (P) × Rate (R) × Time (T) / 100

Where:

Principal (P) is the initial amount borrowed or invested.

Rate (R) is the interest rate per tenure (usually in percentage).

Time (T) is the time duration for which the interest is calculated (usually in years).

By plugging in the values of the principal, rate, and time into this formula, the calculator can quickly compute the simple interest accrued on a loan or investment. This provides users with a clear understanding of the interest amount they need to pay or receive based on the given inputs.

How to calculate simple interest? (with examples)

The formula to calculate simple interest online or manually is already discussed. Let's understand it better through real-life situations.

Example (a) Let's say you invested ₹5,00,000 in an FD account. You made investments for 1 year at a 7% interest rate. The interest earned after 1 year would be ₹35,000.

(₹5,00,000 x 7 x 1) divided by 100 =₹ 35,000.

Example (b) Suppose you decided to invest ₹2,00,000 in your fixed deposit account. You invested for 5 years at an interest rate of 5.5%. Your interest earned for 5 years would be ₹55,000.

(₹2,00,000 x 5.5 x 5) divided by 100 = ₹55,000.

Example (c) Let's say you borrowed ₹10,00,000 from a lender at a 15% interest rate for 5 years. The interest payable on your behalf would be ₹7,50,000.

(₹10,00,000 x 15 x 5) divided by 100 = ₹7,50,000.

Example (d) Suppose you took an education loan on simple interest at a 7% interest rate for 5 years. The loan amount is ₹12,50,000. The interest payable on your behalf would be ₹4,37,500.

(₹12,50,000 x 7 x 5) divided by 100 = ₹4,37,500.

Monthly interest calculators will help in calculating the interest payable or earned every month. Let's understand how to use a simple interest calculator.

How to use Shriram Finance Simple Interest Calculator?

Are you wondering, "How to calculate interest rate per month?" Using Shriram Finance's simple interest EMI calculator is easy and quick. Fill in the required data, and you'll view results in a blink of an eye.

You can calculate interest through Shriram Finance's calculator in 6 easy steps:

Step 1: Go to the Shriram Finance website and open the Simple Interest Formula Calculator.

Step 2: Select the interest type "Simple Interest".

Step 3: Enter the principal amount.

Step 4: Then, you must fill in the annual interest rate.

Step 5: Choose the appropriate tenure for loans or investments from the available options. It can be in days, weeks, months or years.

Step 6: The Shriram Finance Simple Interest Formula Calculator will show you how much total interest you have to pay for loans or have earned (for investments).

Example: Suppose you took a loan of ₹50,000 for 2 years. The rate of interest charged is 10%. When you fill in the details in the simple interest loan calculator, the total amount shown is ₹60,000. Now, the amount you'd have to pay as interest would be ₹10,000. (₹60,000 - ₹50,000).

If you are wondering how to calculate simple interest in Excel, it can be done using a simple formula. The formula is P x R x T, where P= Principal, R=Rate and T=Time.

You might also ask how to calculate EMI in simple interest. The formula for the same is EMI = [p x r x (1+r)^n]/[(1+r)^n-1].

A simple interest calculator for loans works similarly to that of investments.

Benefits of the simple interest calculator

The simple interest calculator benefits are endless. A few of them are discussed below:

• Simple interest calculators online are easy to use and understand. Just fill in the required data, and you'll see results in no time.
• The simple interest calculators monthly help to calculate the interest you have earned or have to pay monthly with no hassles.
• The results calculated are accurate.
• Calculating interest using a simple interest calculator monthly can be done within seconds or minutes.
• Altering inputs is easy with Shriram Finance's simple interest calculator for loans. With simple interest calculators in India, you can compare interest amounts on loans or investments by changing inputs and thus make wise financial decisions.

Final Words

Simple interest is a straightforward method of calculating interest on loans or investments. Online simple interest calculators have made calculating interest quick and easy. The Shriram Finance simple interest calculator monthly can help in accurately calculating interest on loans and investments, thereby ensuring you stay on top of your finances.