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Loan or investment amount
Yearly interest rate
Loan or investment duration
Principal Amount
—
Original amount
Simple Interest
—
Total interest
Total Amount
—
Principal + Interest

Simple Interest Growth

Yearly Breakdown

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What Is Simple Interest?

Simple interest is computed only on the original principal throughout the entire period. Unlike compound interest, it does not add accumulated interest back to principal, so the interest amount stays the same every year.

Simple interest is commonly used for short-term personal loans, car loans, and some bonds. It is easier to calculate and understand than compound interest.

Simple Interest Formula

SI = P × r × t
P = Principal amountr = Annual rate (decimal)t = Time in years

Frequently Asked Questions

When is simple interest used?
Short-term loans (under 1 year), car loans, some personal loans, and government bonds. Also used in informal lending. Most bank deposits and long-term loans use compound interest.
Simple vs compound interest difference?
SI is only on principal; CI includes accumulated interest. For ₹1L at 10% for 20 years: SI=₹3L, CI=₹6.73L. Difference grows with time and rate.
Can SI be higher than CI?
No. CI is always equal to or higher than SI for the same principal, rate, and time. For 1 year they are equal. For longer periods, CI always exceeds SI.

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