What is the main difference between simple and compound interest?

Simple interest is calculated only on the original principal amount. In contrast, compound interest is calculated on the principal amount plus the accumulated interest from previous periods. This 'interest on interest' effect is what makes compound interest a much more powerful tool for wealth growth over time.

When is simple interest typically used?

Simple interest is most commonly used for short-term loans or investments, often for a period of one year or less. For example, it's used in calculating interest for car loans (in some cases) or short-term personal loans. Most long-term savings instruments like fixed deposits or mutual funds use compound interest.

Financial Calculator

Basic financial calculations for everyday use.

Principal (₹)

Rate (% p.a.)

Time (Yrs)

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About the Financial Calculator

Understand the fundamentals of financial calculations like simple interest.

Basic Financial Tools

This section provides a collection of simple yet powerful financial calculators to help you with everyday money-related calculations. It's designed for quick, on-the-go computations that give you immediate insight into your financial questions. Currently, it features a Simple Interest calculator, which serves as a foundational tool for understanding how interest works. We plan to expand this suite with more essential financial calculators in the future to cater to a broader range of needs.

Simple Interest

Simple interest is a straightforward and easy-to-understand method for calculating the interest charge on a loan or the return on a principal amount. Unlike its more complex counterpart, compound interest, simple interest is calculated only on the original principal amount. This means it does not include interest earned on the accumulated interest from previous periods. The calculation is determined by multiplying the principal amount by the interest rate and the time period for which the money is borrowed or invested.

Interest = Principal × Rate × Time

How to Use This Calculator

To use the Simple Interest calculator, you only need to provide three basic inputs. First, enter the initial Principal amount, which is the starting sum of money for your loan or investment. Second, provide the annual interest 'Rate' as a percentage. Finally, enter the 'Time' period in years for which the calculation is to be made. Once these values are entered, click the "Calculate" button. The calculator will immediately show you the total interest earned or owed, as well as the total final amount (principal + interest) at the end of the specified period.

Practical Applications

This calculator helps you quickly find the interest earned or payable and the total amount at the end of the period. It's useful for:

Simple Investments: Ideal for calculating returns on basic financial instruments like simple fixed deposits or bonds where interest is not compounded and is paid out regularly.
Short-term Loans: A perfect tool for understanding the total interest you would pay on a short-term personal loan, a payday loan, or an informal loan from a friend or family member where complex interest calculations are not involved.
Educational Purposes: An excellent resource for students who are just beginning to learn the basic concepts of finance, interest calculations, and money management. It provides a clear, practical example of how interest works.