Calculate interest without the compounding effect
Straightforward growth without compounding
The formula (P × R × T) / 100 is straightforward and easy to understand for everyone.
Since interest doesn't compound, you know exactly how much you will pay or earn each year.
Ideal for short-term personal or business loans where compounding doesn apply.
For borrowers, simple interest is better than compound interest as the total payout is lower.
Interest payments remain constant throughout the loan tenure, aiding better financial planning.
Many bonds pay non-compounding coupon interest, which works on the simple interest principle.
Simple interest is a method of calculating interest where the interest amount is fixed and calculated only on the principal amount. It does not earn interest on previously earned interest.
Grows by same amount
Lower total repayment
Predictable income
SI = (P × R × T) / 100
Common queries about Simple Interest
Simple interest is commonly used for car loans, personal loans from friends/family, and some consumer loans. It is also applicable to certain bonds and non-compounding certificates of deposit.