Simple Interest = P × R × T / 100. Total Amount = Principal + SI. Used in personal loans, short-term borrowing, and basic financial planning.
Simple Interest — Key Questions
What is the simple interest formula?+
Simple Interest (SI) = P × R × T / 100, where P = Principal amount, R = Annual rate of interest (%), T = Time period in years. Total Amount = P + SI. Example: For ₹50,000 at 10% per year for 3 years: SI = 50,000 × 10 × 3 / 100 = ₹15,000. Total = ₹65,000.
When is simple interest used in India?+
Simple interest is used in: personal loans from friends/family, some gold loans, agricultural loans, post office deposits for short periods, inter-corporate loans, and basic financial literacy calculations. Most bank products (FDs, home loans, personal loans) actually use compound interest, which makes borrowing more expensive over time.
How do I calculate monthly interest from annual SI rate?+
Monthly SI = P × R × (1/12) / 100. For ₹1 lakh at 12% annual: Monthly interest = 1,00,000 × 12 × (1/12) / 100 = ₹1,000 per month. For daily interest: Daily SI = P × R × (1/365) / 100.