Simple Interest Calculator
Investments received on a particular scheme are calculated as gains earned against the interest accumulated. The amount received as gains is compiled in either simple or compound interest. This interest is calculated on the principal amount.
It is important to calculate the amount that you receive in the form of profit on the basis of the interest. If the scheme provides you profits on the basis of simple interest, you can use a simple interest calculator. The tool will help you compute the entire amount which you be generating after the maturity period.
Simple Interest Formula
Calculating Total Maturity Amount Value
The simple interest formula that is used by the calculator to find out the overall profits accumulated is mentioned below:
A = P (1 + rt)
Here,
A represents the Overall Accumulated Amount (Principal Amount + Interest Earned)
r represents the Rate of interest per year in decimal; r = R/100
P represents the Principal Amount
t represents the Time
Calculating Interest on Loans and Investments
SI= P X RX T/100
Here
SI represents Simple Interest
R represents Rate of Interest
P represents Principal
T represents Time
This formula is used by simple interest calculator to determine interest rates and maturity amount.
Benefits of Using Simple Interest Calculations
For a variety of financial computations and planning, a simple interest calculator can be a handy tool. The following are its benefits:
- Ease to Use: The principal amount, interest rate, and time period are often the only inputs needed for simple interest calculators, which are user-friendly and simple to use. They are approachable by people with various levels of financial understanding due to their simplicity.
- Financial Planning: When making financial plans, such as calculating the interest received or paid on loans, investments, or savings accounts, it can be helpful to utilise a simple interest calculator.
- Quick Results: Simple interest calculations are easy to understand and can yield quick results, enabling you to compare various investment possibilities quickly or make on-the-spot financial decisions.
- Loan Repayment Planning: When managing loans, you can use a simple interest calculator to calculate how much you will have to pay back over time, which will help you make a budget and keep up with your payments.
- Risk Assessment: You can determine the risk involved in different financial decisions by exploring different interest rates and time periods, which will help you make wiser selections.
- Comparing Options: It is easy to select the financial product or investment opportunity that best fits your goals and risk tolerance when you compare them using a simple interest calculator.
Benefits of Using a Simple Interest Calculator
A simple interest calculator can provide various benefits to the investors. Some of its benefits are mentioned below:
- Convenience: A simple interest calculator can be accessed easily either by visiting the website or through the application. Users can access this calculator anytime and anywhere, which makes it convenient for doing faster calculations.
- Accurate Results: Simple interest calculators are designed with precision which ensures accurate results for calculating simple interest. This will help you make informed financial decisions on the basis of reliable data.
- Comprehensive Financial Tool: A simple interest calculator comes with various features like the ability to check a year wise breakdown of options or interest which helps the users in comparing various interest rates and tenures and determining deeper insights.
- Time-Saving: It is time-consuming to calculate simple interests manually. However, an online simple interest calculator helps in saving your time and effort by automating the calculations.
Difference Between Simple Interest and Compound Interest
The following table highlights the difference between simple interest and compound interest:
Key Points | Simple Interest | Compound Interest |
Meaning | Simple interest is calculated on the principal amount of a loan and not on the interest from the last deposit or loan period | Compound interest is calculated on the principal and the accumulated interest from the last periods |
Interest Charged | Interest is payable only on the principal amount | Interest is payable on the principal as well as accumulated interest |
Interest Paid | The amount is being paid at the end of each period | In case of compound interest, the interest amount is not paid at the end of every month |
Principal Amount | The principal amount is fixed | The principal amount varies over the complete tenure |
Formula | S.I. = (P × R × T)/100 | A = P(1 + r/n)^(nt) |
FAQs on Simple Interest Calculator
- How does a simple interest calculator work?
A basic formula is used by a simple interest calculator to calculate the interest on a principal sum over a defined time period at a given interest rate. Depending on the calculator, it might also offer other details like a breakdown of the computation, a loan amortisation schedule, or an estimate of an investment's future value.
- How do I use a simple interest calculator?
You can use a simple interest calculator by visiting the official website or through the app.
- Is simple interest best for long term investments?
No, simple interest is best for short-term investments. When it comes to long-term investments, compound interest provides the higher returns.
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