Effortlessly calculate your interest on loans, savings, and investments
Total Amount
₹0
Principal Amount
₹5,00,000
Total Interest
₹0
Tenure
5 Years
Annual Effective Rate
6.17%
Simple interest is a straightforward way to calculate the interest earned or paid on a principal amount over a specific period. Simple interest is calculated only on the principal amount. This makes it easier to understand and calculate.
The formula for calculating simple interest is:
Where:
Let's consider an example to understand how simple interest is calculated. Suppose you have invested ₹50,000 at an annual interest rate of 6% for 3 years.
Using the formula:
The simple interest earned over 3 years will be ₹9,000.
While fixed deposits (FDs) in India generally use compound interest, understanding simple interest is essential for comparing different investment options and financial products. Simple interest provides a clear picture of the returns on principal without the complexity of compounding.
Simple interest is a fundamental concept in finance that helps in understanding basic interest calculations. While fixed deposits primarily use compound interest, knowing how to calculate simple interest can aid in evaluating various investment options and making informed financial decisions. By leveraging tools like BankCalculator.ai, you can easily calculate simple interest and plan your financial future effectively.
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