Simple Interest Calculator
A Comprehensive Guide on How to Use Simple Interest Calculator
Borrowing money eases financial burden and helps individuals manage their business and personal obligations adeptly. However, this transaction or loaning comes with interest. The amount that individuals borrow is the principal, and the price that they have to pay for availing this credit facility is the interest amount.
Simple interest is the interest that is calculated on the principal amount of a loan for a given period of time. Individuals can calculate simple interest by using a simple interest calculator.
Read on to know about this in detail!
What Is a Simple Interest Calculator?
A simple interest calculator is a utility tool available online which helps individuals calculate the interest accrued on loans or savings.
This calculator features a formula box, where individuals have to enter the required details to get correct simple interest on loan or investment.
Now that individuals have learned about the definition of a simple interest calculator, let’s move on to the method of calculating it.
What Is the Formula to Calculate Simple Interest?
Simple interest calculation follows the formula discussed below,
A = P (1+rt)
The variables used in this formula are as follows,
P = Principal Amount
t = Number of years
r = Rate of interest
A = Total accrued amount (both interest and principal)
The formula to calculate interest is as follows,
Interest = A – P
As individuals know the simple interest formula, let’s see the way it works/show results in a calculator.
Online simple interest calculator eases the calculation process. Here, individuals have to enter details in the respective fields or adjust sliders to set the principal amount. Individuals have to enter data in three areas, namely principal, interest rate, time.
Let’s understand this calculation more clearly with the help of an example given below!
Suppose Mr. Rajan has invested an amount of ₹ 10,000 for 6 years at an interest rate of 10%.
The interest and amount he will accrue after 2 years will be,
Once individuals enter details in the required fields, this simple interest calculator will display the following result.
Total Amount A = 10,000 (1+0.1*6)
Interest Amount A – P = 16000 – 10000
What Are the Advantages of Using a Simple Interest Calculator?
Following is a list of advantages of using a simple interest calculator,
1. Instant results
A simple interest calculator is an online tool that works with pre-set formulas and shows results instantly.
2. Saves time
Manual calculation of simple interest is time-consuming. However, if individuals use a calculator, they can get results instantly and save time as well.
These calculators are easy to use as individuals have to only enter details in the respective fields to get results.
As the simple interest calculation process occurs online and without manual intervention (except for the data input), the chances of erroneous calculation are nil.
5. Decide a lender
By using a calculator, one can compare the interest rate offered by lenders and assess the borrowing cost.
What Are the Components of Simple Interest?
What Factors Affect Simple Interest?
The factors that affect simple interest are discussed below,
- Principal: As stated in the introductory paragraph, the principal is the amount individuals borrow from banks or lending institutions. Calculation of simple interest occurs on the basis of the principal which individuals will pay along with the price of borrowing.
- Interest Rate: It is the rate that determines the amount to be paid additionally with the principal.
- Tenure/Term: It refers to the time throughout which the simple interest calculation will continue.
The above-mentioned piece thoroughly explains the process of using a simple interest calculator. Read the details and complete the calculation without any error.