How to use this Simple Interest Calculator?
- Enter the value of principal, number of periods and the simple interest rate.
- Press CALCULATE to calculate the value of simple interest and total amount based on the entered principal, number of periods and interest rate.
- Click RESET to reset the entered values and start a new calculation. (You can also start a new calculation without pressing RESET).
What is Simple Interest (SI)?
Simple interest is calculated on a loan’s principal amount or the first deposit into a savings account. Unlike compound interest, simple interest doesn’t compound, so an account holder only earns interest on the principal and a borrower never has to pay interest on the previously accumulated interest.
So, simple interest (S.I.) is a way of figuring out how much interest will accrue on a specific principal sum of money at a certain rate of interest. For instance, if someone borrows $1000 at a rate of 10 p.a. for two years, the person will pay S.I. on the borrowed money for those two years.
Simple Interest Calculation Formula
The formula for calculating simple interest is S.I. = P * T * R, where P stands for principal, R for the annual percentage rate of simple interest, and T for time, which is typically expressed as the number of years. The interest rate is expressed as r/100 and is expressed as a percentage of r percent.
So, Simple Interest (SI) = P * T * R
If ‘A’ represents the amount of total payment at the end of the total period, then
A = P + PTR = P (1 + TR)
Where, A = final amount, P = initial principal balance, R = annual simple interest rate, T = time (in years).
You can use the simple interest calculator above to understand how the relationship between the principal, interest rate, time period and interest varies.