Simple Interest Formula Explained, With Examples
Every simple interest result comes from one formula. Once you understand what goes into it, you can sanity-check any figure you are given, whether by an employer, a bank, a teacher or another website.
The formula
I = P × r × t.
What each input means
- Principal (S$): the value you enter in the calculator.
- Annual rate (%): the value you enter in the calculator.
- Years: the value you enter in the calculator.
Example
For example, with these inputs:
- Principal (S$): 10,000
- Annual rate (%): 3
- Years: 2
the calculator returns:
- Interest: S$600.00
- Total: S$10,600.00
How the result changes
The table keeps the other inputs at their example values and changes principal (s$).
| Principal (S$) | Interest | Total |
|---|---|---|
| 10,000 | S$600.00 | S$10,600.00 |
| 5,000 | S$300.00 | S$5,300.00 |
| 7,500 | S$450.00 | S$7,950.00 |
| 12,500 | S$750.00 | S$13,250.00 |
| 15,000 | S$900.00 | S$15,900.00 |
Why it matters
Interest rates, instalments and returns compound over years, so a small difference in rate or tenure turns into thousands of dollars. Working the numbers out yourself makes it easier to compare bank offers, avoid expensive debt and plan savings goals.
Cars in Singapore carry costs found almost nowhere else, including the Certificate of Entitlement and the Additional Registration Fee. Loans are capped at 60% or 70% of the price depending on the car's Open Market Value, and the maximum tenure is seven years.
Inflation erodes buying power, so a savings goal set in today's dollars needs to be adjusted upwards for the years it will take to reach it. Singapore's core inflation has varied widely over the past decade, so it is worth testing a range of rates.
An emergency fund of three to six months of essential expenses protects you from having to borrow at high rates when something unexpected happens. Once that buffer is in place, extra savings can go towards longer-term goals and investments.
Related calculations
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- Freelance Hourly Rate Calculator: Sets a freelance rate that covers income targets and costs.
- Electricity Bill Calculator: Estimates your electricity bill.
- Air-Con Running Cost Calculator: Estimates what running the air-con costs each month.
Use the Simple Interest Calculator to plug in your own numbers.
Run your own numbers: Simple Interest Calculator