Simple Interest Calculator

Simple Interest is the extra amount of money to be paid along with the principal amount. Simple interest depends on principal amount, time and rate of interest. Simple interest is a linear function. With increase in any of these factors will result in increase in the amount of interest.

Principal Amount

Principal often called initial amount of money, is the money that is borrowed, invested, or deposited. Interest Rate is always applied on the principal amount for calculating any form of interest rates.

Example: If you take a loan of $500 from a bank then $500 is the principal amount.

Rate of Interest (%)

Rate of Interest is the percentage on which the Interest Amount is calculated. Generally we represent rate of interest in Percentage Per Year. Rate is the main factor in determining how much interest we are going to earn or pay to the bank.

Example: If the rate of interest is 8% per year then it means the amount of interest will be $8 for every $100 which is invested or borrowed.

Time Period

Time is the amount of duration the money is borrowed or invested. More the time, more the interest amount will be. Generally we represent time in years while calculating the simple interest.