How is simple interest different from compound interest?

Simple interest is on the principal only. Compound interest is on principal plus previously earned interest, so it grows faster. Savings accounts and most loans use compound interest; some short-term instruments use simple interest.

When is simple interest used?

Some auto loans, short-term personal loans, or bonds may use simple interest. Many banks use compound interest for savings and reducing-balance for loans. Always check your loan or deposit terms.

Simple Interest Calculator

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Use the Simple Interest Calculator below.

Calculate simple interest and total amount. Enter principal, annual rate, and time in years. Formula: I = P × R × T. No signup, free.

Simple Interest Calculator कैसे इस्तेमाल करें

Enter principal
Input the initial amount (P).
Enter rate and time
Enter annual interest rate (%) and time in years.
View results
See interest (I) and total amount (P + I).

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What is simple interest?

Simple interest is interest calculated only on the principal amount. It does not compound — interest is not added to the principal for future calculations. That makes it easier to compute and predict than compound interest. Simple interest is common in some short-term loans, certain bonds, and basic savings products.

Simple interest formula

Example: $10,000 at 5% per year for 3 years gives I = 10000 × 0.05 × 3 = $1,500 interest. Total = $11,500. This calculator uses the same formula; enter rate as a percentage (e.g. 5 for 5%).

I = P × R × T

I = interest, P = principal, R = annual interest rate (as a decimal or use %/100), T = time in years. Total amount = P + I.

Simple vs compound interest

Simple interest: only on principal. Growth is linear.
Compound interest: on principal plus prior interest. Growth is exponential.
Over long periods, compound interest yields much more (for savings) or costs much more (for loans).
Many banks use compound interest for deposits and reducing-balance for loans; some short-term or flat-rate products use simple interest.

अस्वीकरण

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