Complete guide
Reviewed July 2026Simple interest is the most transparent way interest is charged: it accrues only on the original principal, never on the interest already earned. That makes it predictable and easy to compute - the same amount is added every period, forming a straight line rather than a curve.
This calculator returns the interest and the maturity amount from your principal, rate and time using the classic SI = P x R x T formula. Below you'll find every variable explained, several worked examples, and the crucial comparison with compound interest - which quietly out-earns (or out-costs) simple interest over long periods.
Simple interest still governs many real products: most car and personal loans in flat-rate form, some short-term deposits, and the interest on many bonds. Knowing when you're dealing with simple versus compound interest can be worth real money.
The simple interest formula
SI = P x R x T / 100 Maturity = P + SI P = principal (the original amount) R = annual interest rate (percent) T = time in years
Because interest is charged only on P, the amount added each year is constant: P x R / 100. Over T years it simply stacks T times. There's no compounding, so the growth is linear - a fixed step up every year.
Worked examples
- Rs 50,000 at 8% for 3 years: SI = 50000 x 8 x 3 / 100 = Rs 12,000; maturity = Rs 62,000.
- Rs 1,00,000 at 6.5% for 5 years: SI = 100000 x 6.5 x 5 / 100 = Rs 32,500; maturity = Rs 1,32,500.
- Finding rate: Rs 20,000 grew by Rs 4,800 in 4 years - R = SI x 100 / (P x T) = 4800 x 100 / (20000 x 4) = 6%.
- Finding time: how long for Rs 25,000 at 9% to earn Rs 9,000? T = SI x 100 / (P x R) = 9000 x 100 / (25000 x 9) = 4 years.
Simple vs compound interest
The two agree in year one, then diverge. Compound interest earns 'interest on interest', so its lead widens every year - which is why it's the borrower's enemy on credit cards and the saver's friend on long investments. Simple interest, by staying on the original principal, is always the smaller number over time.
| Years | Simple interest total | Compound total | Compounding advantage |
|---|---|---|---|
| 1 | Rs 1,10,000 | Rs 1,10,000 | Rs 0 |
| 5 | Rs 1,50,000 | Rs 1,61,051 | Rs 11,051 |
| 10 | Rs 2,00,000 | Rs 2,59,374 | Rs 59,374 |
| 20 | Rs 3,00,000 | Rs 6,72,750 | Rs 3,72,750 |
Using this calculator
- Enter the principal, the annual rate and the time in years.
- Read the simple interest and the maturity amount (principal + interest).
- To solve for rate or time instead, rearrange: R = SI x 100 / (P x T), or T = SI x 100 / (P x R).
- If a product actually compounds, use the compound interest calculator instead - simple interest will understate savings and understate loan cost.
Common mistakes
- Using simple interest for a compounding product - it under-counts both savings growth and loan cost over time.
- Entering time in months without converting to years (or the rate not matching the period).
- Comparing a flat-rate (simple) loan against a reducing-balance (compound) loan as if the rates were equivalent.
- Forgetting that maturity = principal + interest, not just the interest.
- Ignoring tax on interest, which reduces the real return.
Frequently asked questions
Glossary
- Simple interest
- Interest charged only on the original principal.
- Principal (P)
- The original amount invested or borrowed.
- Rate (R)
- The annual interest rate as a percentage.
- Time (T)
- The duration in years over which interest accrues.
- Maturity
- Principal plus total interest - what you receive at the end.
- Compound interest
- Interest earned on principal plus accumulated interest.
- Flat rate
- A loan method charging simple interest on the full original principal throughout.
- Reducing balance
- Interest charged on the outstanding balance; the fairer, compound-style method.
Key takeaways
Simple interest = P x R x T / 100, charged only on the original principal, so it grows in a straight line and is easy to predict. Compound interest overtakes it over time by earning interest on interest - the gap reaches lakhs over decades. Beware flat-rate loans, which use simple interest on the full principal and cost far more than the headline rate suggests; always confirm which method a product uses.
Enter principal, rate and time above for the interest and maturity; then compare against the compound interest calculator to see how much compounding adds over your horizon.