Simple Interest

SI equals P times R times T divided by 100, where P is the principal, R is the annual rate in percent, and T is time in years. The total amount to repay is A equals P plus SI. For ₹25,000 borrowed at 12 percent for 3 years, SI equals 25000 times 12 times 3 divided by 100, which is ₹9,000, so you repay ₹34,000.

Simple interest is common in short-term personal loans, car loans in some markets, instalment plans, and most school maths problems. Bank deposits, home loans, and credit cards use compound interest instead. If a product quotes a flat rate, that usually maps to simple interest on the original principal.

Simple interest is always calculated on the original principal, so each year you pay or earn the same amount. Compound interest is calculated on principal plus previously accumulated interest, so it grows faster. For 1 year they are equal; over 10 years compound can easily beat simple by 30 to 50 percent.

Convert the time period to years as a decimal: 9 months is 0.75 years, 18 months is 1.5 years, 100 days is roughly 100 divided by 365, about 0.274 years. Plug that into the formula. The calculator accepts decimal time values directly, so you do not need to do the conversion by hand.

A 10 percent flat rate on a 5-year loan is not the same as a 10 percent reducing-balance rate : the effective reducing-balance rate is almost double. Always ask whether a quoted rate is flat (simple) or reducing (compound), because the EMI on the same loan can differ by 20 to 30 percent.

Only for very short-term FDs that pay interest at maturity without compounding, which is rare in India. Most Indian bank FDs compound quarterly, so use the compound interest calculator for a realistic figure. The numbers here are illustrative for learning the simple interest concept.