When a borrower borrows money from a lender, he/she must pay an amount over the borrowed amount while paying back to the lender. The borrowed amount is called the principal and the amount that one pays for borrowing money is known as simple interest.
Simple interest is calculated as principal amount times the number of periods and the interest rate. Since simple interest does not consider compounding, there is no interest levied on interest. Thus, the interest amount paid as part of every installment towards repayment of the borrowings will remain constant throughout the tenure.
How to use the Fisdom simple interest calculator?
Fisdom ’s simple interest calculator allows investors to know the amount of simple interest that they can earn from any deposits. For using the simple interest calculator, here are the steps to be followed:
- Enter or select the investment amount
- Select or enter the expected return from investment
- Select the investment duration (in years)
Fisdom ’s simple interest calculator will then show:
- Total value of investment
- Interest earned on the investment
What are the features of Fisdom ’s simple interest calculator?
Calculating simple interest is easy and one can also do it manually. However, manual calculations can involve human errors and can reflect incorrect results. Therefore, an ideal choice is to calculate investment returns using the simple interest calculator online.
Fisdom ’s online simple interest calculator shows the result within a matter of seconds. The calculator is based on a mathematical formula to derive simple interest on the principal amount by considering the interest rate and number of years of investment.
Simple interest = Principal investment * [ (Rate of Interest * Number of Years)]
Here,
- The number of years is the investment duration.
- Expected returns is the accrued amount including the principal amount and the interest amount.
- Simple interest is the interest earned on the principal amount
To understand the functionality of a simple interest formula, let’s take an example. Suppose an investor invests an amount of Rs. 1,000 to earn an interest at 10% with an investment tenure of 5 years. The simple interest will therefore be calculated as:
Simple interest = Principal investment * [ (Rate of Interest * Number of Years)]
= 1000 (0.1*5) = Rs. 500
Total expected returns = Principal + Interest received = Rs. 1000+ Rs 500 = Rs. 1500
What are the benefits of using Fisdom ’s simple interest calculator?
Some of the key benefits of this calculator are:
- One of the main benefits of using Fisdom ’s simple interest calculator is to get accurate investment calculations for enhanced investment decision-making.
- An investor can also change some of the variables multiple times to get to the desired results since the calculator is free-to-use and reflects accurate results each time.
- The results offered by this calculator are instantaneous since it only takes a couple of seconds to get the complete information about an investment returns.
- The calculator helps in saving a lot of time while calculating and comparing across investment options depending on interest offerings.
- By using this calculator, investors can take informed investment decisions after thoroughly comparing the potential returns that each offers.
Difference between simple and compound interest
Some of the key differences between simple and compound interest are:
| Parameters | Simple interest | Compound interest |
|---|---|---|
| Complexity | Easy to calculate because of limited components | Multiple components involved in calculation |
| Interest amount | Interest amount remains the same across the tenure | Since it is interest on interest, the amount changes due to addition |
| Cost of borrowing | Remains same across tenure | Changes through the tenure |
| Benefits | Benefits borrowers since the cost of borrowing is lower | Benefits investors since it results in faster capital growth |
Conclusion
A simple interest calculator can be an ideal tool for those who want to know about the time value of money. By easily calculating how much one has to pay or receive for borrowing or lending funds, one can perform better financial planning with this tool. Any investor can easily make use of this tool to weigh different investment options as per returns expected and aim to invest in the right avenue.
