Simple Interest Calculator

Simple interest is the rate at which you take a loan from the lender. It is added to the principal to determine the total repayment amount. The principal is the amount borrowed for a specific period of time, and the interest is the amount paid back to the lender. The simple interest is calculated by multiplying the principal by the number of periods and the interest rate. Simple interest does not follow the rule of compounding, so you do not have to pay interest on interest. 

What is a Simple Interest Calculator?

An online tool that helps in calculating the simple interest on a loan or investment is called a simple interest calculator. The maturity value of the loan or investment on which interest is calculated using the basic interest technique can be easily determined. On a daily, monthly, or annual basis, you can calculate simple interest online on the principal amount. You can enter the principal amount, yearly rate, and duration in days, months, or years in the formula box of the basic interest calculator. Interest on the loan or investment will be shown by the calculator.

How Does Simple Interest Calculators Work?

The total amount accumulated, including principal and interest, will be displayed using the basic interest calculator. The following mathematical formula is used by the basic interest calculator:

P (1+rt) = A

P stands for Principal Amount.

R stands for interest rate.

t = Years

A = Total Amount Accrued (principal plus interest)

Interest is equal to A minus P.

Let's look at an example to better understand how the basic interest calculator works. The principal is Rs. 10000, with 10% interest rate, and six years time period. The simple interest can be calculated as follows:

A = 10,000 (1 + 0.1% * 6) = Rs. 16,000.

A - P = Rs. 16000 - Rs. 10000 = Rs 6,000 is the interest.

Simple Interest Formula with Example

The following mathematical formula is used by a simple interest calculator India to calculate interest based on the principal amount, interest rate, and period of the investment or amount borrowed.

SI = P X R X T for simple interest calculation

A = P + I or A = P + (P X R X T) or A = P (1 + RT) 

This is the basic simple interest equation that we can use to calculate Principal, Rate, and Time: P = A / (1 + rt) for the calculation of the principal amount

R = (1/T) x (A/P)

Solve for R in order to calculate the rate: R = (1/T) x (A/P - 1)

Solve it for T to determine the time period: T = (1/R)(A/P - 1)

Let's take a closer look at each variable in a basic interest equation:

Principal (P): The amount borrowed or invested that you wish to compute interest on is known as the principal.

Rate (R): This is the interest rate that will be applied for determining the interest amount.

Time (T): This is the amount of time you are willing to invest or borrow funds.

Interest Earned (I): This represents the total interest payable on borrowed funds.

Maturity Amount (A): This is the total amount that the consolidated value, which comprises the principle and interest amounts.

Let's look at an example to show how the basic interest method is used to determine interest and maturity value:

To Determine the Interest on Loans and Investments:

Let's say you put Rs. 1,00,000 into a savings plan that offers 8% annual simple interest for two years.

In this example, the interest you earn will be computed as follows:

Simple Interest: 1,00,000 x 8% x 2

Similarly, if you borrow the same amount for a similar rate and period, you will have to pay Rs. 16,000 in interest for two years. However, if you decide to pay in EMIs (Equated Monthly Installments), this calculation will not work because EMIs are calculated using the reducing balance method. To calculate the total maturity amount value, let's assume that the principal amount (P) you invested in an FD is Rs 1 lakh. If the rate of interest (R) is 10%, then r will be R/100, or 0.1. Additionally, if you are investing for three years, then t = 3.

This is how the maturity value will be determined:

Rs. 1,30,000 is equal to A = 1,00,000 (1 + 0.1 x 3).

Thus, Rs. 1.3 lakh is the whole maturity amount. It covers both the interest (Rs 30,000) and the principal (Rs 1 lakh).

How to Use the BlinkX Simple Interest Calculator?

The online BlinkX simple interest calculator is quite user-friendly. Three inputs are needed for this SI calculator:

1. The amount that was invested, borrowed, or lent as the principle.
2. The simple interest rate.
3. The period of time that the principle on the loan will remain unpaid or the period of time that you will retain the funds invested.
4. The SI calculator will display the total interest and maturity amount you will pay or earn over the specified term after you have entered these parameters.

Benefits of Simple Interest Calculator

The simple interest calculator has the following advantages.

• It helps you figure out how much interest you will pay on a loan or receive on an investment. 
• It can help you compare different investment options and choose the one that best suits your goals.
• It is quick and simple to use. All you need to do is enter a few variables, and it will calculate interest in a matter of seconds.
•  It is free to use and you can use it more than once. Due to its accuracy, you can better plan your finances. 

By comparing the calculations from an SI calculator and a CI calculator, you can gain a better understanding of how these ideas differ from one another and their impacts.

Difference Between Simple Interest and Compound Interest

A clearer explanation of the distinction between simple interest (SI) and compound interest (CI) may be found in the following table.