Simple Interest Calculator: It’s a calculator that calculates the Simple Interest on a certain quantity of the money borrowed or lent for a specific period of time. Principal Amount refers to the amount of money borrowed or lent. The term “simple interest” refers to interest calculated just on the Principal Amount. In this article, we’ve covered everything you need to know about the Simple Interest Calculator, including how to use it and its importance in everyday life, in this article.

Simple Interest Calculator

Simple Interest Calculator is used to calculate interest on the total accrued amount of the tenure for the money that is being lent or borrowed. You can get the desired results within seconds with the use of the SI Calculator. You need specific values required to be fed in the calculator and follow two or three simple steps and get your interest amount in the blink of an eye. So go through this page thoroughly to get all the vital information about the Simple Interest Calculator.

What is Simple Interest?

The rate at which a specific amount of money is borrowed is called Simple Interest. The borrowed money which is given for a particular period is called the principal. The person asking for money is called a borrower, and the person who lends it said to be a lender. To borrow some funds from the lender, the borrower has to pay an extra amount of money apart from the initial amount borrowed in the first place.

The money borrowed or initial loaned for a specific period is called the principal, whereas the extra amount you pay to the lender or earn from a borrower is called the interest. The interest rate is the value charged by the lender, expressed as a percentage of the principal. The simple interest is calculated by multiplying the principal amount by the number of periods and the interest rate.

Uses of Simple Interest Formula

Simple Interest Formula is also used in daily life activities in several ways, which have been elaborated below:

1. When one has borrowed money: To pay interest with the borrowed amount, a borrower has to pay Principal amount + interest. The formula for SI can help to compute the borrowing cost as interest.
2. When someone lends money: When a lender has given money to the borrower to earn interest in exchange, you can calculate the extra income amount as the interest by using the Simple Interest formula.
3. When someone has invested money: If a person has deposited their assets or money in FD, RD or savings schemes like SSY, PPF or others, they can also calculate the Interest Income using a simple interest calculator.

What is a Simple Interest Calculator?

A simple interest calculator is an online tool that calculates the interest rate of loans or an amount without compounding. To calculate the simple interest, you need the loan’s principal amount, interest rate, and tenure. Simple interest can be calculated on a daily, monthly, or yearly basis. The simple interest calculator has a formula box, where you enter the principal amount, annual rate, and period in days, months, or years. The calculator will display interest on the loan or the investment.

How does Simple Interest Calculators work?

Method 1:
The simple interest calculator will show the accrued amount that includes both principal and interest. The mathematical formula incorporated by the simple interest calculator is stated as follows”

A = P (1+rt)
The above symbols stand for:
P – Principal Amount
R – Rate of interest
t – Number of years
A – Total accrued amount (Both principal and the interest)
Interest = A – P.

Here is an example is given to elaborate on how the simple interest calculator works.
Suppose Rs. 20,000/- is the principal amount borrowed at the rate of interest of 10% and for the time of 5 years. In this case, the simple interest can be calculated as:
A = 20,000 (1+0.1×5) = Rs 30,000.
Interest = A – P = 30000 – 20000 = Rs 10,000.

Method 2:
Alternatively, simple interest can also be calculated using the following formula:

SI = P×R×T/100
where,
SI – Simple Interest
P – Principal
R – Rate of interest
T – Time

For example, Mr X borrowed an amount of Rs.50,000 at an interest rate of 5% for 5 years. Put the given values in the formula above, the SI on the principal amount will be calculated as:
SI = 50000 × .05 × 5 = Rs 12,500.

How to use the Simple Interest Calculator?

To know the exact value of the interest you earn from the borrower or owe to the lender, you can use the Simple Interest Calculator keeping the following steps in mind:

1. Choose the appropriate Interest Type, ‘Simple Interest’ in this case.   
2. You will need the principal amount.
3. Then you will need the annual rate of interest.
4. Now specify the time duration in days, weeks, quarters, or years.
5. The calculated value of Simple Interest is displayed on your screen.

When to use Simple Interest Formula?

It instantly shows you the amount you have to pay or receive after the maturity period. You have to feed the basic details like principal amount, time, and interest rate in a simple interest calculator to calculate the amount. 

• You can calculate the interest amount you have to pay if you have borrowed the money.
• If you have loaned money to someone, then you can calculate the interest amount using the formula.
• In case you have invested money in saving FD, PPF, SSY, RD, or other saving schemes, you can right away calculate the interest.

What are the benefits of the Simple Interest Calculator?

1. The Simple Interest Calculator shows you the simple interest on your deposit in seconds.
2. You can compare the simple interest rates against the compound interest rates and determine the interest you pay on any loan.
3. It provides extensive details of interest, rate and principal amount.
4. The online calculator rules out the possibilities of mathematical error, which is typical using manual methods.
5. The online calculator provides a quick overview of the interests you will receive while you borrow or lend, or deposit money. 
6. It helps you track your profits and losses over time.
7. The calculator will help you in future planning. 
8. It enables you to calculate the total amount you will receive on maturity. 
9. It saves time over manual calculators. 
10. You can access it 24*7.

Simple Interest Calculator Examples

Example 1: Calculate the Simple Interest if the principal amount is Rs.4000, the time is 2 year, and the rate is 10%. Also, calculate the total amount at the end of 2 years.
Solution:
According to the formula of simple interest we have,
S.I. = [(Principal (P) × Time (T) × Rate (r)) / 100]
Substituting the values,
S.I. = [(4000 × 2 × 10)] / 100
= 20000/100
= 800
So, the simple interest at the end of 2 years will be Rs. 800.
For the amount after 2 years,
A = P + S.I.
So, A = 4000 + 800 = 4800
Hence, the total amount at the end of the given tenure (i.e. 2 years) will be Rs.4800.

Example 2: Rahul takes a loan of Rs.20000 from a bank for 1 year. The rate of interest is 10% per annum. Find the good and the amount he has to pay at the end of the year.
Solution:
Given:
Loan Amount, i.e. Principal Amount, P = Rs.20000
The annual rate of interest, R = 10%
Time, T = 1 year
Simple interest is given by,
SI = (P × R ×T) / 100 = (20000 × 10 ×1) / 100 = Rs.2000
Amount that Rahul has to pay to the bank at the end of the year is given by,
Principal + Interest = 20000 + 2000 = Rs.22,000

Example 3: Michael borrowed Rs.40,000 for three years at the rate of 4.5% per annum. Find the interest accumulated at the end of 3 years.
Solution:
Here,
P = Rs.40,000
R = 4.5%
T = 3 years
SI = (P × R ×T) / 100 = (40,000× 4.5 ×3) / 100 = Rs.5400

FAQs on the Simple Interest Calculator

Q. Is Simple Interest Calculator easy to use?
A. Yes, the Simple Interest Calculator is a user-friendly tool, easy to understand and use. You need to follow two-three simple steps to get the required results. You will require three quantities, i.e., principal amount, interest rate and time. The Simple Interest Calculator will calculate the interest in seconds.

Q. What is the prime use of SI calculators?
A. You can calculate the interest rate on the principal amount. Furthermore, SI Calculators is also used to determine the total return incurred after completing tenure.

Q. Can I change the unit of the amount to other currencies?
A. Yes, a unique feature of this computing tool is that one can compute values as per different currencies.

Q. Do interest rates on principal amount changes over time in Simple Interest?
A. No, unlike compound interest on the principal amount, stays stagnant.

Q. What are the applications of simple interest in daily life?
A. Car loans, amortised monthly, and retailer instalment loans, also calculated monthly, are some of the daily life applications of simple interest.

This simple interest calculator helps you to find out the simple interest of an amount within seconds with accurate results. We provide a lot of study material for all classes on embibe.com to assist you to prepare for the tests. Students can also get study materials for competitive exams such as mock tests and practise questions for JEE Main (Engineering Exam) and NEET (Medical Exam) to crack the exams with flying colours.