Securing Hannav Ledger...
Securing Hannav Ledger...
Glossary
Simple interest is calculated only on the original principal amount, without earning interest on previously accrued interest.
Simple interest grows in a straight line — you earn the same interest amount every period on your original principal only.
Simple interest applies to many short-term loans and some instruments. It understates long-horizon growth compared to compounding, making it useful for quick estimates but poor for multi-year investment projections.
₹50,000 loan at 10% simple interest for 3 years accrues ₹5,000 per year, total interest ₹15,000. Compound interest on the same terms would cost slightly more for lenders and yield more for savers.
Simple Interest = P × R × T ÷ 100Indian home loans typically use monthly reducing balance method, which is effectively compound interest on the outstanding principal.
Some short-term deposits, educational examples, and certain overdue tax calculations reference simple interest conventions.
Because returns generate their own returns, growth accelerates over time — the difference becomes massive over 15–30 year horizons.