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What is Simple Interest?
Simple interest is a straightforward method for calculating interest on a sum of money, often a loan or a savings account. It's based on a fixed percentage of the initial principal amount, regardless of how much time passes. To calculate simple interest, you multiply the principal (the initial amount) by the interest rate and the duration.
What Is a Simple Interest Calculator?
Simple interest (SI) is very straightforward. It is a method of calculating returns on an investment that does not compound. Since many real-life situations use a simple interest formula, it is helpful for investors to understand the interest calculation method. One can do it manually, which consumes time and increases the chances of error. The other option is to take the help of an online simple interest calculator, which uses external inputs and returns the results accurately and quickly.
How Does a Simple Interest Calculator Work?
Calculating the return you will get on your investment in advance is crucial for financial decision-making. A simple interest calculator can help you understand how much return you will receive at maturity if the investment is not compounding.
The simple interest calculator on the Angel One website is a free tool available to all. Investors can use it to compute returns on specific investments and compare alternative options by entering the relevant principal amounts, interest rates, and durations. The user-friendly interface helps anyone easily use it without market knowledge or technical expertise.
What Is the Simple Interest Calculator Formula?
As it is clear from the name, simple interest is calculated on the principal amount only. A simple interest calculation doesn't consider the interest accrued on the principal amount.
The simple interest calculator formula uses the following to determine the final amount:
A = total amount accumulated, including principal and interest
P = the principal amount
r = rate of interest
t = time period
Let’s understand it with an example to simplify further.
Suppose you have invested ₹1 lakh at a simple interest rate of 5% for 3 years.
A = P(1 + rt)
= 1,00,000 (1 + 0.05*3)
At the end of the 3 years, your investment will be ₹1,15,000.
Instead of manual calculations, you can use an online calculator. A simple interest calculator has a simple interest formula built into it. All you have to do is input the variables based on which it will do the calculation.
How to use Angel One Simple Interest Calculator Online?
The Angel One online simple interest calculator is designed to help investors easily calculate the simple interest on a principal amount. It simplifies your life by saving time and effort. Just follow the steps given below:
- Enter the principal amount
- Enter the interest rate
- Enter the duration
That’s it. The calculator takes the values and computes the simple interest on your investment/loan.
Here is an example to understand the usage of the Angel One online simple interest calculator better.
Suppose you have ₹1,00,000 that you want to invest for 7 years at an 8% simple interest annually. The simple interest calculator will take seconds to display the amount you will earn as interest, ₹56,000, and the total, ₹1,56,000.
You can check if the total amount is sufficient to meet your investment needs or if you need to invest more. You can use the calculator for different scenarios for a loan or an investment.
Benefits of Using Angel One Simple Interest Calculator
The following are the benefits of the Angel One simple interest calculator:
- Accuracy: The foremost benefit of Angel One simple interest calculator is accuracy. It helps ascertain the amount that you need to repay for a loan or receive from an investment.
- Saves time: You can use an online simple interest calculator multiple times as required to compare returns on different principal amounts and interests. It saves time by reducing human effort.
- Financial planning: Using tools like simple interest or compound interest calculators, you can compare how different options work and their impact on your investment plan.
- Estimate the current value of money: A simple interest calculator helps determine the cost of borrowing by calculating the present value of your money. Present value is the current value of a future sum of money at a specified rate of return.
Difference Between Simple Interest and Compound Interest
Simple interest and compound interest are two ways to calculate interest, and they can lead to significantly different results over time.
Simple Interest is calculated only on the initial amount of money you borrowed or invested (the principal). While compound interest, on the other hand, considers not just the initial amount but also the interest earned in previous periods.
Here’s a table to clearly understand the difference between simple interest and compound interest:
|SI = P × R × T
|A = P(1 + r/n)^(nt)
|Interest on Interest
|If you invest ₹10,000 at a 5% annual interest rate for 2 years. You will earn ₹1,000 as interest, and the total amount will be ₹10,997.
|If you invest ₹10,000 at a 5% annual interest rate compounded annually for 2 years. You will earn ₹1,025 as interest, and the total amount will be ₹11,025.
Simple Interest Calculator FAQs
What is the simple interest calculator?
The simple interest calculator on Angel One is an online tool that helps users calculate simple interest on their investments or borrowings.
How to use the simple interest calculator online?
A simple interest calculator from a reliable source would function based on simple user inputs - initial amount, rate of interest, and duration - to compute the final result. The calculator will automatically show you the principal amount, interest accrued, and total payable separately.
Is the simple interest calculator free to use?
Yes, the simple interest calculator on Angel One’s page is absolutely free of charge. You just need a device with an internet connection to use it.
How is simple interest calculated?
Simple interest is calculated only on the principal amount. The interest is calculated once a year. The formula for simple interest calculation is A= P(1+rt), where A is the total amount receivable on maturity, P is the principal, r is the rate of interest, t is the time or years. In case you want monthly interest, divide the formula by 12. Alternatively, you can also use the online simple interest calculator to calculate the interest instantly.
Where is the concept of simple interest used?
Simple interest is widely used in many real-life scenarios. There can be loans and investments that work on the basis of simple interest. For such instances, you can use the online simple interest calculator and make the right financial decision.