Simple Interest Calculator

What is Simple Interest?

Simple interest is the interest calculated only on the principal amount of the loan or an investment, unlike compound interest, wherein the interest is calculated on the principal amount & the previous interest as well. The calculation of Simple interest is less complex as compared to compound interest. We use the Simple interest formula in various sectors for estimation, like banking, finance, automobile & so on. Generally, Simple interest is denoted as S.I.

Looking into the history of Simple interest, we see that it was discovered way back in 5000 B.C. Later, Compound interest was introduced, with the evolution of time. The Bank of England Base Rate became the predominant interest rate in the UK when it was invented in 1694 and was set at 6%. It dropped as low as 0.25% in 2018, going as high as 17% in November 1979.

What is a Simple Interest Calculator?

A Simple interest calculator is a mathematical online tool that helps you to calculate the Simple interest on your investments. Using a Simple interest calculator to compute the maturity amount of your investment saves a lot of time. Interest could be estimated on a monthly, quarterly and yearly basis. To calculate Simple interest on investment you need a few components like principal amount, interest rate and the investment tenure.

Pocketful’s Simple interest calculator offers a user-friendly interface that even a 5-year-old can use. You just have to provide the system with the components like principal amount, interest rate and your investment tenure. In the case of a loan, our Simple interest EMI calculator allows you to calculate the loan EMI amount within a few seconds. Simple interest calculators help you to calculate the maturity amount for your investment. Which in turn helps you to plan for financial goals accordingly.

How Does a Simple Interest Calculator Work?

A Simple interest calculator works on the Simple interest formula. The formula is given below:

S.I. = P*R*T/100

S.I.	Amount of the Simple interest
P	Principal amount
R	Interest rate
T	Investment tenure

Let us understand it with an example.

Suppose Mr. Sam wants to invest Rs.1,00,000 and earn returns from it. He is offered the interest rate of 7% p.a. For 3 years on a Simple interest basis.

Now, Mr. Sam wants to know the future value that he will receive after 3 years.

He will come to Pocketful’s Simple interest Calculator India and will enter the required components.

Here, P will be Rs.1,00,000, R is 7% and T is 3. And voila! The future value of Mr. Sam’s investment will be 1,21,000.

Components of Simple Interest

1. S.I. (Simple Interest Amount): The amount that the borrower has to pay is an interest payment in the case of a loan. On the other hand in the case of investment, this is the amount the person will receive based on the Simple interest formula.
2. P (Principal Amount): It is the principal amount on which the interest will be calculated. This is the investment or the loan amount that the person may have.
3. R (Interest Rate): In the case of a loan, interest is the cost of taking a loan. In the case of investment, it is the return that the investor earns.
4. T (Tenure): Tenure is the period between the dispersal of the funds to the full repayment.

Benefits of using a Simple Interest Calculator

Using a Simple interest formula calculator serves several advantages to the users. Some of them are listed below:

1. Simplification: Calculating the future value of your investment using the Simple interest formula with the help of a traditional calculator could be a hassle. Using a financial tool like the Simple interest calculator simplifies the whole process of computing the future value of the investment. And the process is quicker.
2. Close Estimate: Simple interest calculators provide an estimate of the future value of your investment. They don’t give you the exact future payment, but they offer a rough idea of what to expect while investing a certain amount.
3. Cost Efficiency: Most of the Simple interest calculators that are present online are free, saving you consulting fees for financial advisers. These calculators require only a few numerical inputs to estimate the future value of your investment.
4. Time Efficiency: Calculating the future value of your investment by hand is time-consuming, especially for those unfamiliar with mathematical terms. Simple interest calculators save a significant amount of time.
5. Comparison: There are different investment options available in the market. It becomes hard to compare every alternative without using an online calculator.