How Can You Calculate Simple Interest Easily?

When you borrow from or lend to financial institutions, you pay or earn interest on it. Interest so earned is calculated in two ways – simple interest and compound interest. To make an informed and rational financial decision, you need to be well aware of these concepts both as borrowers and depositors. Let’s see what is simple interest, how it is employed, and how you can calculate simple interest easily online. 

What is simple interest? How it is calculated?

Simple interest refers to the charging of interest only on the principal amount or the original amount of loan or deposit for the borrowed or invested tenure. Most of the financial institutes employ simple interest on car loans, consumer loans, etc., and on fixed deposits where depositors opt for monthly and quarterly payouts.

Simple interest is calculated based on the following formula:

Simple interest = P X N X I / 100

Where, 

P – Principal amount of investment

I – Rate of interest

N – Number of years of investment

Let’s take an example of a fixed deposit investment with a monthly payout to understand this. Let’s say you invest INR 5,00,000 in a bank at a simple interest rate of 8% p.a. for one year. That means you have lent INR 5 lakhs for a year at an 8% p.a. rate of interest. Let’s calculate simple interest:

Simple interest = Principal X Number of years X Rate / 100

                            = 5,00,000 X 1 X 8/100

                            = 40,000

That means you would earn an interest amount of INR 40,000 for the year on your fixed deposit investment. That means, if you opt for a monthly interest payout, you would receive INR 3,333.33 as an interest amount every month. 

Similarly, simple interest is applicable for many loans such as auto loans and consumer loans. For the long number of years or tenure, manually calculating the simple interest amount can be a time-consuming task. In such cases, a simple interest calculator comes in as a handy tool that helps you calculate simple interest online easily.

What is a simple interest calculator?

Simple interest calculator is a valuable online tool that is designed on the simple interest formula which helps you calculate simple interest online in no time. You need to provide the basic details of your deposit or loan to calculate the simple interest online using ETMONEY’s simple interest calculator. 

Let’s say you need to calculate simple interest online using a simple interest calculator for your auto loan of INR 8,00,000 borrowed for 5 years at the rate of 11% p.a. You need to input the details of the original borrowed amount, interest rate, and a number of years to arrive at the simple interest amount. You would pay a total interest of INR 2,80,000 for 5 years. You can use ETMONEY simple interest calculator to calculate simple interest online within seconds. Here are the simple steps to follow to calculate simple interest online:

• Visit ETMONEY and go to the tools and calculators’ tab
• Click on the simple interest calculator option 
• Input the details such as investment amount, time period, and expected rate of return
• Once you input the details, a simple interest calculator instantly calculates simple interest amount online
• You can adjust the details and re-calculate!

By using the ETMONEY simple interest calculator you can get a rough estimate of how much interest you can earn on your investment or how much you need to pay on your loans. You can easily compute the simple interest amount online before you invest or borrow. You can even compare the options based on your calculations made using ETMONEY’s simple interest calculator. Make use of the valuable tools before you make an investment.