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Personal finance is crucial to our life. We need to manage our finances to maintain a decent financial status. Managing personal finance often includes borrowing money. Borrowing money is to meet certain financial needs at that time. But we need to return the borrowed money after a specific time frame. For instance, you can borrow money from banks to pursue higher studies abroad. After completing the course, you can repay the money within the notified time. But there is a third important component called “Interest” we need to consider.
While borrowing capital, the lender will include a monetary charge called interest. Interest is more like compensation for lending money. The money lenders perceive the interest as income. Interest as income has become a business on its own. Both government and private sectors have such financial corporations. Different corporations offer different interest rates. Thus, we need to calculate the interest capital as per the interest percentage. Using the calculated interest, we can select a suitable loan type.
Consider bank A has a 3% per ₹1000 interest rate and bank B has a 5% per ₹10000 interest rate. Hence it is difficult to determine which bank offers low interest. You can do a manual calculation to find out the interest. But humans often make mistakes. We can’t afford mistakes while dealing with money. That’s why we need a simple interest calculator in India to know accurate interest rates. Wondering how to calculate interest using an interest rate calculator? Here is a step-by-step guide to an interest percentage calculator.
Simple Interest Calculation Formula
People know two interest types: simple and compound. Simple interest involves the money lent. But compound interest involves the money lent and the paid interest on the loan. The banks often use compound interest in rare cases. But simple interest is the more common type of interest applied.
To calculate the simple interest, we use the simple interest formula below:
A = P (1+rt)
To know the total interest amount repaid, subtract the principal from accrued money:
Interest Capital = A – P
Terms Used to Calculate Simple Interest
In this section, we take a closer look at the terms used in the simple interest formula. Each term will be elaborate to ensure accurate calculation.
Principal (P): It refers to the capital amount lent by the financial corporation. The corporation can be a bank or an individual.
Rate of Interest (r): The percentage of interest expected in return by the lender (in numbers).
Time (t): The notified time intimated by the lender to repay the principal and interest capital (in years).
Accrued Money (A): The borrower’s total money to repay. It comprises both principal and interest capital.
Example for Calculating Simple Interest
Let’s look at a simple example to calculate simple interest. Consider the principal amount is ₹ 10000.. Let the interest rate be 15%, and the repayment time is 12 years. To calculate the simple interest:
A = P (1+rt)
Here, P = 10000, r = 0.15, and t = 12. So, the simple interest will be
A = 10000 (1+0.15 *12)
A = 10000 (1+ 1.8)
A = 28000.
To calculate the interest capital that needs to be repaid,
Interest= A – P
Interest= 28000 – 10000
Interest= 18000
Simple Interest Calculator
A simple interest calculator is a tool used to calculate the interest on the principal. It helps us to calculate the interest using the simple interest formula. As the algorithm behind it doesn’t make mistakes, it provides you with accurate interest. We can use this tool to know the difference between various loan interest types. It allows us to choose an efficient loan type with ease. The simple interest calculator India displays interest if we enter all terms in the formula box.
Steps to Use Chegg’s Simple Interest Calculator
Using Chegg’s rate of interest calculator is simple. It doesn’t take a genius to know how to calculate interest using a bank interest calculator. Below is the step-by-step process of using a simple interest calculator in India.
Follow the below steps to calculate the simple interest using a simple interest calculator in India.
Step 1: First, select the type of interest you must calculate. If you don’t know your interest type, select simple interest, as it is more common.
Step 2: Next, you need to enter the principal in the formula box. Entering the incorrect amount leads to incorrect simple interest. Which in turn makes you lose a low-interest loan.
Step 3: After entering the principal amount, enter the annual rate of interest. You need to ensure that you enter the interest rate in percentage.
Step 4: Then, enter the repayment period notified by the lender. Also, you need to select the valid unit for this parameter (years, months, or days).
Step 5: The monthly interest calculator will display the accrued amount and interest.
Input Parameters Required
While using a simple interest calculator in India, you must enter all the input parameters required by the calculator. Entering an incorrect input parameter will tamper with the results. Here’s detailed information on input parameters to avoid mistakes.
Principal amount: is a crucial input parameter in calculating simple interest. The calculator evaluates the simple interest based on the principle. For example, if you borrow ₹10,000 from the bank, enter P=10000 in the formula box.
Rate of Interest: you need to enter the proper percentage interest rate. Normal numbers are different from percentages. If you loan money at the interest rate of 10%, enter r=10 % in the formula box.
Repayment time: This is the input parameter where people often make mistakes. If you loan the money for 2 years, enter t=2 in the formula box. Select the correct unit (years, months, and days).
Final sample result: As per sample input, you borrow ₹10,000 from the bank at a rate of 10 % for two years. Enter all the parameters in the formula box. The calculator will display the accrued money as ₹12,000 and interest as ₹2,000.
Benefits of Using Chegg’s Simple Interest Calculator
Chegg’s simple interest calculator will present you with certain benefits. We list some benefits of using a simple interest calculator in India below:
- Chegg’s monthly interest calculator will help you calculate the simple interest in minutes.
- It will allow you to know the different interest rates.
- It helps you to choose a suitable loan type with low interest.
- It reassures you with simple, accurate interest and accrued capital.
- It also allows you to calculate compound interest and compound accrued principal.
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Efficiently Calculate and Manage Simple Interest With Ease
It is tiring to fulfill all the financial needs. You get stuck on major decisions to tackle finance. Financial corporations will lend you a hand in these difficult times by providing funds. But stay alert while loaning the funds from a lender. They may expect high interest from the funds they provide. Compare various loan types and lenders before considering borrowing money.
Use a simple interest calculator in India to quickly know the accurate interest rate. So far, we have established how to calculate interest using an interest rate calculator. With the help of the monthly interest calculator, you can calculate interest in a matter of seconds. It will allow you to apply for loans on time. Also, repaying the money within time is important. Being late in repayment may lead to an increased interest rate. Make good use of your money! Best of luck in reaching your financial goals.
Want to explore helpful techniques to save and grow your hard earned money? Dive in to our guide on Save Money.
Frequently Asked Questions ( FAQ’s )
To calculate the simple interest, use the simple interest formula below:
,
To know the total amount of interest repaid, subtract the principal amount from accrued money:
where
● P – Principal
● r – Rate of interest (in percentage)
● t – Time (in years)
● A – Accrued mone
To calculate the interest, multiply the principal by the time and interest rate. You also can use a simple interest calculator. To use a calculator, follow the below steps:
● select the type of interest.
● enter the principal in the formula box
● enter the annual rate of interest
● enter the repayment period.
● The calculator will display the accrued amount along with interest.
To calculate the simple interest: A = P (1+rt). For example, if you want to calculate simple interest on ₹ 1000 where the rate of interest is 10% and time is 2 years, then
A = 1000 (1+0.1 *2)
A = 1000 (1+ 0.2)
A = 1200
If you want to calculate the interest capital;
Interest= A – P
Interest= 1200 – 1000
Interest= 200
Yes, there are two formulas for calculating simple interest. To calculate the simple interest, use the simple interest formula A = P (1+rt). To know the total amount of interest repaid, use the formula, Interest Capital = A – P. Remember, you can’t calculate interest capital without calculating simple interest. Unless the lender provided it explicitly.
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