Simple Interest Calculator
Calculate simple interest for any principal, rate, and time. See SI vs compound interest difference. Used in flat rate loans, NSC, some government bonds and money lending.
Simple Interest Calculator
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Enter the principal amount
Annual interest rate
Estimates based on constant rate assumption. Actual returns may vary.
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Simple interest is used in flat-rate loans by dealers and NBFCs. A 10% flat rate on Rs 1L for 3 years = Rs 30,000 total interest. The same loan at 10% compound (reducing balance) = Rs 33,100. But the EFFECTIVE reducing balance equivalent of a 10% flat rate is 18.7% — dealers never mention this.
What is Simple Interest?
Simple interest is interest calculated only on the original principal amount — not on accumulated interest. It is the most basic form of interest calculation, used in flat-rate loans, short-term money markets, and some government instruments.
Simple interest formula
Amount = P + SI = P x (1 + RT/100)
P = Principal R = Annual rate T = Time in years
Example: Rs 50,000 at 9% for 2 years: SI = 50,000 x 9 x 2/100 = Rs 9,000
Simple interest in loan context — the hidden truth
Many vehicle dealers and NBFCs quote "flat" or "simple" interest rates on loans. A 10% flat rate on a 3-year loan sounds lower than a 13% reducing balance bank loan — but the flat rate loan is actually more expensive. The reducing balance equivalent of 10% flat for 3 years is approximately 18.7%. Always convert flat rates to reducing balance before comparison.
Where simple interest is genuinely used
NSC (National Savings Certificate) compounds interest annually but the maturity is sometimes expressed as total simple interest-equivalent. Treasury bills (91-day, 182-day, 364-day) use simple interest for their discount pricing. Short-term inter-company loans and trade credit often use SI for ease of calculation.
ThriftRupee tips on simple interest
Tip 1: Always compare loans on reducing balance basis. Never accept a loan offer with a "simple" or "flat" rate without first converting to reducing balance equivalent using our Flat vs Reducing calculator.
Tip 2: SI is good for investors in short tenures. For investments under 1 year, compound and simple interest are nearly identical. NSC's SI calculation gives predictable maturity amounts that are easy to plan around.
Tip 3: Understand chit fund calculations. Many chit funds in India use simple interest for calculating subscriber returns. The effective IRR of a chit fund subscription can be calculated only by converting the SI bid discount to a reducing balance equivalent rate.