Simple Interest Calculator

Whether you have invested money or taken a loan, you may wish to know the interest you owe. Interest can be calculated in two ways: as simple interest or compound interest. An interest calculator gives you the exact amount of interest on an investment or loan. Here's a look at what simple interest is and how you can calculate it.

What is simple interest?

Simple interest is calculated only on the principal. It does not include the interest that has been accumulated over time.

You can use a simple interest calculator to know how much you have earned from your savings account or FD. It can also tell how much interest you are paying on your car loan. You can use this to compare between two loans or between two timeframes to make a decision before taking a loan.

How to calculate simple interest?

Calculating simple interest involves three things:

Principal (P): The amount you have invested or borrowed

Rate (R): Rate of interest (expressed as a percentage and is usually per year)

Tenure (T): The number of years for which you want to invest the money or take the loan

Let's dive into the formula for simple interest:

Simple interest can be calculated with:

I = (P x R x T)/100

Here:

I = Simple interest
P = Principal
R = Rate of interest
T = Tenure

You can calculate the total amount after maturity of an investment or closing of a loan. It is:

A = I + P

Here:

P = Principal
A = Total amount

Here's an example:

Let's say you want to create a fixed deposit of ₹10,000 for 7 years. The bank is offering an annual interest of 6.3%.

So, we have:

P = ₹10,000
R = 6.3%
T = 7 years

The interest earned is:

I = (10,000 x 6.3 x 7)/100 = ₹4,410

The final maturity amount for your FD is:

A = ₹10,000 + ₹4,410 = ₹14,410

While the numbers are easier here, the principal or tenure may not be straightforward. For instance, you may use ₹10,500 to create an FD with a tenure of 3 years, 11 months and 12 days. These calculations can be overwhelming. This is where a simple interest calculator comes in handy.

Simple interest calculation for months

Usually, the simple interest rate is stated 'per year'. So, what happens when you need a personal loan only for 6 months, maybe to renovate your house? Or maybe you want to invest some money for 9 months before your dream holiday? That is when you need a simple interest calculator for months.

Simple interest formula for months:

I = (P x R x T)/(12 x 100)

So, if you have invested ₹80,000 for 9 months at an annual interest rate of 7.5%, here is how it is calculated:

P = ₹80,000
R = 7.5% per annum
T = 9 months

The interest earned in this case is:

I = (8,000 x 7.5 x 9)/1200 = ₹4,500

On maturity, you will receive:

A = ₹80,000 + ₹4,500 = ₹84,500

Note that the formula may vary if the interest is mentioned quarterly or half-yearly. Manually, such calculations can be confusing and prone to error. You can do it in seconds with an interest calculator.

Advantages of using the Kotak811 simple interest calculator

• Quick and accurate results every time.
• Easy to use and saves time.
• Allows you to take better decisions.
• Performs unlimited free calculations to compare your options.
• Helps make informed investment, deposit, and loan decisions.

How to use the Kotak811 simple interest calculator

The Kotak811 Simple Interest Calculator is super easy to use. The user-friendly interface is designed for all kinds of users. It allows you to enter the details manually or use the draggable input bars. All you need to do is follow the steps below:

• Mention the principal - loan amount or investment
• Select the tenure - select the type of calculation as monthly, quarterly, half-yearly or annually
• Put the interest rate - If you let it be, the calculator automatically uses the current rate for the chosen loan or investment.

The interest rate calculator automatically displays the final amount and the interest. You can use the calculator as many times for different amounts and tenures to compare. Change the values to find the most suitable loan or investment opportunity for your needs.

Frequently asked questions answered.

1. How is simple interest different from compound interest?

Simple interest calculates gains only on the principal. Compound interest calculates gains on the principal and the accumulated interest.

2. Are nominal interest rates and effective interest rates the same?

The nominal interest is the rate quoted. The effective rate is the overall interest rate on the principal and considers compounding. The effective interest rate is the same as the nominal rate in simple interest calculations.

3. Are interest earnings on savings accounts taxable?

There is no tax on savings account interest income of up to ₹10,000 as per Section 80TTA of the Income Tax Act. Interest above this is taxable under capital income rates of your tax slab.