Calculate simple interest using the formula SI = P × R × T / 100. Compare with compound interest to see why long-term wealth grows faster with compounding.
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Calculate Simple Interest
That’s ₹6,506 more than the lowest-yielding bank. Pick wisely.
| Bank | 1Y Rate | 5Y Rate | Your Maturityin 5 yrs | Senior Bonus | |
|---|---|---|---|---|---|
IDF IDFC First Bank BESTBest 5yr rate | 6.50% | 7.15% | ₹1.43 L | +0.5% | Open FD |
AU AU Small Finance BankHighest FD rate | 7.10% | 6.75% | ₹1.40 L | +0.5% | Open FD |
IND IndusInd BankOpen FD online in 5 mins | 6.75% | 6.65% | ₹1.39 L | +0.5% | Open FD |
ICI ICICI BankInstant redemption option | 6.55% | 6.45% | ₹1.38 L | +0.5% | Open FD |
KMB Kotak Mahindra BankOpen FD online instantly | 7.10% | 6.20% | ₹1.36 L | +0.5% | Open FD |
Rates are indicative for general public. Add 0.5% for senior citizens. Subject to change. Affiliate links — we may earn a commission at no cost to you.
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| Principal | Rate | Years | Simple Interest | Compound Interest | Difference |
|---|---|---|---|---|---|
| ₹1,00,000 | 8% | 1 yr | ₹8,000 | ₹8,000 | ₹0 |
| ₹1,00,000 | 8% | 3 yr | ₹24,000 | ₹25,971 | ₹1,971 |
| ₹1,00,000 | 8% | 5 yr | ₹40,000 | ₹46,933 | ₹6,933 |
| ₹1,00,000 | 10% | 10 yr | ₹1,00,000 | ₹1,59,374 | ₹59,374 |
| ₹5,00,000 | 8% | 5 yr | ₹2,00,000 | ₹2,34,664 | ₹34,664 |
Compound interest calculated annually. The gap widens sharply after year 5 — which is why long-term savings should always use compounding instruments.
Simple Interest Used For
Compound Interest Used For
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Simple Interest (SI) is calculated only on the principal amount. It doesn't compound. SI = P × R × T / 100, where P = principal, R = rate per year, T = time in years.
Simple interest is used for short-term loans, EMI calculations for the first period, car loans in some countries, personal loans, and rural lending. Banks in India typically use compound interest for deposits.
In simple interest, interest is calculated only on principal. In compound interest, interest is calculated on principal + accumulated interest. Over time, compound interest generates significantly more returns.
Simple interest is used for most car loans and short-term borrowings where banks calculate interest on the original principal only. Compound interest applies to FDs, savings accounts, PPF, NSC and most investments. For borrowers, simple interest loans are cheaper than compound interest loans at the same stated rate.
SI = Principal x Rate x Time, where Time is in years. For 8 months: Time = 8/12 = 0.667 years. For 45 days: Time = 45/365 = 0.123 years. Banks often use exact day count for loans. The Simple Interest calculator handles any time period including fractions of years.
Savings accounts technically pay simple interest calculated on daily balance but credited quarterly. This approximates monthly compound interest in practice. FDs pay compound interest with quarterly compounding for most banks. Home and car loans use the reducing balance method, similar to monthly compounding, not true simple interest.
For investors, compound interest is always better - your earnings generate further earnings. For borrowers, simple interest loans are cheaper. Rs 1 lakh at 10% for 5 years: Simple Interest total = Rs 1.5L. Compound Interest total = Rs 1.61L. The compound interest instrument grows your wealth 7.3% faster over this period.
Yes. Simple interest applies to most informal and inter-company loans. Enter the principal, agreed annual rate, and exact tenure. For loans shorter than a year, enter the time in decimal (e.g., 0.5 for 6 months, 0.25 for 3 months). Indian tax law requires inter-company loans to charge at least 12% p.a. to avoid deemed dividend treatment — keep this in mind when structuring internal business lending.
Calculate the future value of a one-time lumpsum investment at an expected annual return rate.
See the power of compound interest — calculate how your money grows with different compounding frequencies.
Calculate Fixed Deposit maturity amount and interest earned for any compounding frequency and tenure.