- Principal
- Interest
- Total interest
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- Total amount
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- Principal amount
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Figures are estimates for planning only, not investment or tax advice.
Simple interest is charged on the original principal only, never on accumulated interest. It applies to most short-term personal borrowing, some vehicle loans and many informal arrangements.
The formula
SI = P × R × T ÷ 100. ₹1,00,000 at 8% for 5 years earns ₹40,000 of interest, for a total of ₹1,40,000. The same money under annual compounding would earn ₹46,933.
When the difference matters
Over one year the two are identical. Over five years compounding adds about 17% more; over twenty years, more than double. Anything long-term should be evaluated on a compound basis.
Frequently asked questions
Which loans use simple interest?
Many short-tenure personal and gold loans, and interest on delayed payments.
Can I use this for months rather than years?
Yes — enter the period in years as a fraction, so six months is 0.5.
Do savings accounts use simple interest?
Interest is calculated daily on the closing balance but credited quarterly, so it compounds quarterly.