Simple Interest Calculator
Year by year
| Year | Interest that year | Total interest | Amount owed | If compounded |
|---|
The formula, and the one place it goes wrong
Interest = P × R × T ÷ 100. Principal, rate per year, time in years. The arithmetic is trivial; the mistake is almost always the T. Six months is 0.5 years, not 6. Ninety days is 90 ÷ 365, not 90. Putting months into a formula that expects years multiplies the answer twelvefold, and the result still looks like a number.
That is why the time unit is a separate choice here rather than something you convert in your head.
Simple against compound
Simple interest is charged on the original amount every year and nothing else. Compound interest is charged on the amount plus everything already added. On ₹1,00,000 at 8%, simple interest earns ₹8,000 every year without fail. Compound earns ₹8,000 in the first year and more in every year after, because the interest itself starts earning.
Over one year they are identical. Over five the gap is noticeable, over twenty it is large. Both are in the table so the difference is visible rather than described.
Where you will actually meet it
- Short-term and informal loans — a few months, where compounding hardly matters.
- Some car and personal loans — check the agreement, many do compound.
- Fixed deposits paying interest out rather than reinvesting it.
- Exam questions — where the formula is usually the point.
Home loans, credit cards and savings accounts compound. If someone quotes you simple interest on a long loan, read the agreement — the effective cost is often higher than it sounds.
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Frequently Asked Questions
Interest = P × R × T ÷ 100, where P is the principal, R the rate per year as a percentage and T the time in years. The total you repay is the principal plus that interest. It is shown worked out with your own numbers below the answer.
Simple interest is charged on the original amount only, every year. Compound interest is charged on the amount plus the interest already added, so it grows on itself. Over a year or two the difference is small; over ten it is large, and the comparison is shown here rather than left to be imagined.
Short-term and informal lending, some car and personal loans, many fixed deposits paying interest out rather than reinvesting it, and most school and exam questions. Home loans and savings accounts almost always compound.
Switch the time unit and it is converted to years for you — six months becomes 0.5, ninety days becomes 90 ÷ 365. Getting this conversion wrong is the commonest arithmetic slip with the formula.
Yes. Choose what you want to find and fill in the other three. The same formula rearranges to give the principal, rate or time.
No, it is calculated in your browser.