Simple Interest Calculator

Simple interest is the most basic way to price the use of money: a fixed percentage of the principal, per year, for the time the money is used — interest never earns interest. The formula everyone learns in school, SI = P × R × T ÷ 100, is still how a lot of real-world lending works: informal and personal loans, gold loans at many lenders, invoice late-payment interest, security deposits, court-awarded interest and short-term business borrowing are all commonly quoted on simple interest.

Enter the principal, the annual rate and the period (fractions of a year work — 18 months is 1.5 years) and you get the interest plus the total repayable. Because there's no compounding, the relationship is perfectly linear: double the time or the rate and the interest exactly doubles. That linearity is what makes simple interest easy to reason about — and why lenders who compound instead can surprise borrowers who assumed otherwise.

When you're offered a loan, always confirm whether the quoted rate is simple or compounded (and if compounded, how often). For the same headline rate, simple interest is always cheaper for the borrower. Compare the two side by side with our compound interest calculator: ₹1 lakh at 12% for 5 years costs ₹60,000 in simple interest but ₹76,234 compounded annually. On short tenures the gap is small; over years it becomes the difference between a fair deal and an expensive one.