Simple interest formula
SI = (P × R × T) ÷ 100
- P = principal (the amount lent or borrowed)
- R = rate of interest per year (%)
- T = time in years
- Total amount A = P + SI
Example: ₹50,000 at 9% a year for 3 years earns SI = 50,000 × 9 × 3 ÷ 100 = ₹13,500, so the total amount is ₹63,500.
Time in months or days
- Months: T = months ÷ 12. ₹25,000 at 12% for 8 months: SI = 25,000 × 12 × (8 ÷ 12) ÷ 100 = ₹2,000.
- Days: T = days ÷ 365. Banks and courts in India generally use a 365-day year.
Finding the rate, time or principal
Rearranging the same formula gives the missing value:
| To find | Formula |
|---|---|
| Rate (R) | R = (SI × 100) ÷ (P × T) |
| Time (T) | T = (SI × 100) ÷ (P × R) |
| Principal (P) | P = (SI × 100) ÷ (R × T) |
Choose what you want to find at the top of the calculator and fill in the rest.
Simple vs compound interest
Simple interest is always calculated on the original principal, so it grows in a straight line. Compound interest adds each period's interest to the balance, so it grows faster. ₹1,00,000 at 10% for 5 years earns ₹50,000 as simple interest but ₹61,051 when compounded yearly.
Where simple interest is used
- Short-term personal loans between friends and family
- Some car and gold loans quoted on a flat rate
- Interest on delayed payments and security deposits
- School and competitive exam maths (SSC, banking, railways)
Simple interest on ₹1 lakh
| Rate | 1 year | 3 years | 5 years |
|---|---|---|---|
| 6% | ₹6,000 | ₹18,000 | ₹30,000 |
| 8% | ₹8,000 | ₹24,000 | ₹40,000 |
| 10% | ₹10,000 | ₹30,000 | ₹50,000 |
| 12% | ₹12,000 | ₹36,000 | ₹60,000 |
Because simple interest grows in a straight line, doubling the time doubles the interest — unlike compound interest, which speeds up over time.
Common mistakes
- Mixing monthly and yearly rates. A rate of 1% a month is 12% a year — convert before using the formula.
- Forgetting to convert months or days into years.
- Calling the total “interest”. Interest is only the extra over the principal; the amount you repay is principal + interest.
Frequently asked questions
What is the formula of simple interest?
SI = P × R × T ÷ 100, where P is the principal, R the yearly rate in percent and T the time in years. The total amount is P + SI.
How do I calculate simple interest for months?
Convert months to years by dividing by 12. For 8 months, T = 8 ÷ 12 = 0.667 years.
How do I find the rate of interest?
R = SI × 100 ÷ (P × T). For example, if ₹10,000 earns ₹2,400 in 3 years, R = 2,400 × 100 ÷ (10,000 × 3) = 8%.
Is simple interest better than compound interest?
For a borrower, simple interest costs less. For an investor, compound interest earns more over time.
What is 2% monthly interest in yearly terms?
2% a month is 24% a year as simple interest. On ₹50,000 that is ₹1,000 a month or ₹12,000 a year.