Simple Interest

Last Updated : 9 Oct, 2026

Simple Interest (SI) is a method of calculating the interest charged or earned on a principal amount over a fixed period. It is calculated based solely on the principal amount, which remains unchanged throughout the calculation.

Simple Interest Formula

The formula to calculate Simple Interest is:

Simple Interest Formula

Where,

  • P is the Principal amount
  • R is annual Rate of Interest
  • T is the Time for which principal is invested

In simple interest, the interest grows linearly over time. This means the amount of interest added each year is the same, forming a sequence in arithmetic progression (AP).

Example:

  • If the principal is $100, the rate is 10%, and the time is in years, the interest added each year will be $10.
  • After 1 year: $10
  • After 2 years: $20
  • After 3 years: $30
  • And so on...

Four basic terms related to simple interest are:

1. Principal

The principal is the amount borrowed or invested. It is denoted by the letter "P". The principal remains constant while calculating simple interest.

It can be calculated as:

P =\dfrac{100 \times S.I.}{R \times T}

2. Rate

The rate of interest at which the principal amount is invested or borrowed for a specific period is called the rate. For example, the rate of interest can be 5%, 10%, or 13%. Here, the interest rate can be represented by "R".

It can be calculated as:

R =\dfrac{100 \times S.I.}{P \times T}

3. Time

The duration during which the principal is borrowed or invested is referred to as time. Time is symbolized by "T".

It can be calculated as:

T =\dfrac{100 \times S.I.}{P \times R}

4. Amount

When a person acquires a loan from a bank, he or she is required to repay the principal borrowed plus the interest amount, and the total amount repaid is referred to as the Amount. It is denoted by the letter "A".

Thus,

A = P + SI
P = A - SI
A = P (1+\frac{R \times T}{100})

Note: When the time is given in months instead of years, you just convert months into years in the formula.

T = Months/12

Then put this into the simple-interest formula: S.I. =\dfrac{P \times R \times T}{100}

Substituting T = M/12: S.I. =\dfrac{P \times R \times M}{100\times 12}

Similarly, when time is given in days, the formula becomes: S.I. =\dfrac{P \times R \times d}{100\times 365}

Simple Interest Calculator

Use this calculator to quickly calculate both the simple interest and the total amount.

Calculating Simple Interest

Simple interest on any sum of money is calculated using the steps discussed below,

Simple interest is found by using the formula SI = (PRT)/100.

Step 1: The principal(P), Rate of interest(R) and time(T) of loan amount is noted.

Step 2: Use the formula SI = (P × R × T / 100) to calculate Simple Interest

Step 3: Use all the values from Step 1 and substitute them in Step 2.

Step 4: Simplify the value obtained in Step 3 to get required simple interest.

Let's consider an example to understand the procedure better.

Example: Find the SI on ₹10000 deposited for 3 years at 5% per annum.

Adam deposits $8,000 in a savings account at a simple interest rate of 7% per annum for 3 years. What will be the simple interest earned, and what will be the total amount after 3 years?

Solution:

  • P = $8,000
  • R = 7% per annum
  • T = 3 years

SI = (P × R × T/100)
SI = 8000 × 7 × 3 / 100
SI = 168000/100 = 1680
Total Amount = Principal + Interest
Total Amount = 8000 + 1680 = $9680

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