Simple Interest Calculator

Where simple interest still matters

Simple interest is charged only on the original amount, never on interest already earned. Because it does not compound, the total grows in a straight line. ₹1 lakh at 10% for three years earns exactly ₹30,000 in simple interest. With yearly compounding, the same deposit would earn about ₹33,100. The longer the period, the wider that gap becomes.

You will still meet simple interest in daily life. Informal loans between friends, family or small businesses are often agreed this way because the sums are easy. Some short-term deposits and certain loan products also calculate interest on the original principal. Car and personal loans, however, normally use a reducing balance, which is different from both a flat rate and simple interest on the full amount.

Be careful with flat-rate offers. A lender quoting 8% flat on a three-year loan calculates interest on the full amount for the whole term, even though you repay part of it every month. The effective rate on such a loan is much higher than 8%, often close to double. This calculator shows the flat interest figure, and the EMI calculator shows a reducing-balance loan at the same headline rate, so comparing the two exposes the difference quickly. When you lend money informally, writing down the rate, the period and whether interest is simple or compound avoids misunderstandings later. It takes a minute and can save a friendship. If you are the borrower, ask for the rate as an effective annual figure on a reducing balance, since that is the only fair way to compare different offers side by side.