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What is a simple interest calculator and how to use it in 2022 in the Philippines

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A purchaser borrows money from a lender and pays a percentage back to them; this is known as the simple interest rate or interest payments. The initial principal is the borrowed amount, and the total interest is the extra money given back to the lender for utilizing the money over a specific time period. This could be paid back annually (annual interest rate), monthly, or daily.

A simple interest calculator is used to calculate simple interest. To do the task, users are required to use a complex formula that involves dividing the principal by the number of periods and then multiplying it with the annual interest rate. A unique trait of simple interest is that it does not compound, and interest is not paid on interest.

A simple interest calculator is one of the financial instruments and a computerized tool that allows you to calculate total interest earned without spending too much time or doing intricate calculations. It already has a simple interest rate formula box filled out in the online tool. Enter the initial principal, interest rate, and the time periods on the tool according to your needs.

It is a free tool that calculates the interest and the future value on loans or savings without compounding. You can calculate the simple interest on the principal on a daily, monthly, or yearly basis.

It has a formula box in which you enter the principal, annual interest rate, and time in days, months, or years, and the calculator will show you interest on the loan or the investment and the future value.

Basically, simple-interest online calculators are simple to use. To calculate simple interest, enter the following information:

The principal amount, i.e., the amount invested or borrowed

The basic interest rate

The period during which you will keep the money you have invested or the period during which the loan's principle will be due

After you enter this data and press the **Calculate **button, the simple interest calculator will utilize the simple interest formula to determine the accumulated interest and the future value in seconds. You will receive the exact interest you would receive/pay during the term.

The online calculator instantly shows you the initial principal amount you will have to pay or receive after the maturity period, i.e., the future value of the loan. To get the estimated amount, you must first enter basic information like principal amount, time period, and annual interest rate in the tool. One can use the simple interest online calculators when:

You want to calculate the interest amount you will pay if you have borrowed the money.

If you are the granter, you can use the tool to calculate the total interest earned easily.

It can also be used to know the time periods it will take to achieve payment.

If you had put in some cash in saving fd, ppf, ssy, rd, or any other saving scheme, you can use it to calculate the interest.

It could be used to estimate the future value of the loan.

A simple interest calculator is an online tool that makes a quick and easy simple interest calculation. Unlike other online calculators, this tool can display the results of complex numbers instantly.

The following points explain how the tool can help you:

The tool shows the accumulated interest(total interest) earned and even the principal amount.

It can immediately give a calculated amount, even for longer terms or time periods where people often commit calculation errors or make mistakes.

Unlike the manual method of calculation, the tool shows the exact amount.

It gives insight and enables one to do financial planning.

It enables us to calculate the sum total of what we will receive on maturity.

It saves time more than manual calculators.

It is free and can be accessed 24/7.

The online calculators are of two types: ordinary simple interest calculators and exact simple interest calculators. Some simple interest calculation are made specifically for either of these two, and some are made for both of them.

In an ordinary calculator, a year is considered to be 360 days while calculating the interest.** **The procedure to use the ordinary simple interest calculator is as follows:

Enter the principal amount, the interest rate, the number of years or time periods, and x for the unknown value in the respective input fields provided.

Now click on

**Solve**to get the simple interest.The simple interest for the given amount will be displayed in the output field immediately.

**Example**: Let's say a businessman got a money loan of ₱1,500,000 from a bank to expand his business on May 30, 2012. The agreement is that he pays it back with a 6% interest rate on August 10, 2012(end date). Now, input these values on the ordinary simple interest calculator to calculate the simple interest:

The initial principal is ₱1,500,000.

The interest rate is 6%.

The time period (number of days from May 30 to August 10)

**To calculate the number of days,**

May 31 = 1 day. (the start date is always the day after the borrowed date)

June 1-30 = 30 days

July 1-31 = 31 days

August 1-10 = 10 days

Total = 72 days.

**Converting days to years:**

72 days x (1 year/360 years) = ⅕ years.

It will now use the simple interest formula to calculate interest:

A = P (1+rt)

A = 1500000 x (1+6/100×1/5)

A = 1500000 x (1+0.06×0.2)

A = 1500000 x (1+0.012)

A = (1500000 x 1) + (1500000 x 0.012)

A = 1500000 + 18,000

A = ₱1,518,000

Interest = A - P = ₱1,518,000 - ₱1,500,000 = ₱18,000

In exact simple interest calculator, a year is considered to be 365 (or 366 days of a leap year) days in order to calculate interest. The procedure for using the exact simple interest calculator is the same as the ordinary. It is as follows:

To calculate simple interest here, enter the principal amount, the interest rate, the time periods, and x for the unknown value in the respective input fields provided.

Now click on the button

**Solve**to get the simple interest.The simple interest for the given amount will be displayed in the output field immediately.

**Example**: Someone borrowed money (₱18,000) from his friend on December 25, 2010. His promise is that he pays it back on 14 February 2011 at 8% interest. Now let's use the tool to determine how much is to be paid.

The principal amount is ₱18,000, and the interest rate is 8%

Counting the number of days from December 25 to February 14 (the start date is always the day after it was borrowed):

December 25 to 31 = 6 days

January 1 to 31 = 31 days

February 1 to 14 = 14 days.

Total = 51 days.

It will then convert days into years:

51 days x (one year/365 days) = 51/365 years.

To calculate simple interest, it will now use the simple interest formula:

A = P (1+rt)

A = 18,000 x (1+8/100x51/365)

A = 18,000 x (1+0.08×0.140)

A = 18,000 × (1+0.112)

A = (18,000 × 1) + (18,000 × 0.112)

A = 18,000 + 2012.05

A = ₱20,012.05

Interest = A - P

= ₱20,012.05 - ₱18,000

= ₱2012.05

A simple interest calculator helps borrowers and lenders make good financial decisions because it provides a wide variety of features. Some of the benefits of using it are:

The tool helps calculate simple interest conveniently and without any errors (using the simple interest formula). Using the online calculator, you're sure that there are no possibilities of mathematical errors that are common when using manual methods.

The tool can be used to calculate interest regardless of the currency. It works well for any currency, such as the dollar, euro, pounds, peso, etc., and calculates values as per the different currencies.

The online tool provides a very quick picture of the interest you will probably have while you borrow cash or while you lend cash (interest earned) or even deposit it. The tool can be used to calculate the overall comparison between various borrowing options, hence aiding in decision making. It provides comprehensive details, including interest and principal amounts. You can also see the future value of your loan.

There are no special features or functions; one just needs to input the values correctly and then they are sure of getting their problem solved in a split of seconds.

Some of the functions one may likely see while using this tool are:

A = total accrued amount ( i.e, principal + interest), or future value

P = the principal amount

I = the interest amount

r = the rate of interest per year(accumulated interest) when it is given in decimal; r = R/100

R = the interest rate per year(accumulated interest) when it is given in percentage; R = r x 100

t = the time periods involved in days, months, or years

From the simple interest formula, that is;

A = P(1 + rt), which is derived from;

A = P + I and since I = Prt then;

A = P + I becomes A = P + Prt, which can be rewritten as;

A = P(1 + rt)

**Compounding frequency**. The compounding frequency is the number of times the accumulated interest is credited to the account on a regular basis (or not at all up to maturity) it could be a year, half-yearly, monthly, weekly, or daily or repeatedly.**Principle**. This is also called the amount taken and means the sum that is initially borrowed from the bank or the total amount infused. It is denoted by P.**Rate**. This is the rate of interest at which the principal amount is given to a borrower for certain time periods. The interest rate can be 5%, 10%, 15%, etc.**Compound interest**. Compound interest is the interest a lender earns on interest. This can be illustrated by using this basic instance; Let's say you have ₱10,000 and it earns 5% interest each year; the compound interest will be ₱10,500 at the end of the first year. At the end of the second year, the compound interest will be ₱11,250.**Loan start date**. On each future growth capital loan, the loan commencement date or period is either (a) the first day of the first full calendar month following the borrowing date, if such borrowing date is not the first day of the month, or (b) the same day as the borrowing date, if such borrowing date is the first day of the month.**Interest end date**. If any, the interest end date is the date set forth in the relevant securities notes, or if none is specified, the due date for redemption of the notes (except when payment of the borrowed amount is incorrectly withheld or refused upon presentation), in which case interest will accrue, both before and after judgment, at the interest rate.**Accrued amount**. Accrued amount means accumulated over time, which is most often used when referring to an individual or a business's interest, income, or expenses. Interest in a savings account, for instance, accumulates over time so that its total value grows.**Accrued interest**. On a loan or other financial obligation, accrued interest is the amount of interest that was accrued at a specified date but has not yet been repaid.

Using the computer's keyboard to input data for this tool is very easy. This is because everything is basically digits, so there are really no special functions.

We can use the calculator to calculate the amount, A, the final investment value, using the formula: A = P (1 + rt). Here, P is the total sum that is going to be invested at an interest rate (R) per annum (annual rate) for a fixed tenure (T).

When r is in decimal form; r = R/100; r and t should be in the same units of time.

We now have A = P + I = P + (P x r x t), and finally; A = P (1 + rt).

When we are to calculate the total sum accrued in the loan periods or the future value, the calculator uses the formula A = P (1 + rt).

When we are to calculate the principal amount, it uses P = A / (1 + rt)

When we are looking for the rate of interest in decimal, it uses r = (1/t)(A/P - 1)

When we are to calculate the rate of interest in percent, it uses R = r x 100

When we are finding time, it uses t = (1/r)(A/P - 1)

Someone purchased a car worth ₱480,000. He borrowed the money from the bank at 10% per annum for a period of 4 years. Using a simple interest calculator, how much amount does he have to pay after this time period?

First of all, you input the above data correctly on your calculator;

The amount borrowed or principal, P = ₱480,000

Rate of interest, r = 10%

Time or term, t = 4 years

It will use the simple interest formula to solve; A = P(1+rt)

A = 480,000(1 + 10/100 x 4

A = 480,000(1 + 0.1 x 4)

A = 480,000(1 + 0.4)

A = (480,000x1) + (480,000x0.4)

A = 480,000 + 192,000

A = 672,000

So, his payment is ₱672,000 after 4 years.

If someone borrows a sum of ₱460,500 for a term, 21 months at 20% per annum, how much simple interest will they remunerate, using the simple interest calculator?

Firstly, as usual, we input the data into the calculator;

Principal, P = ₱460,500

Time or term, T = 21 months

Rate of interest, r = 20%

The calculator will use the formula for interest; I = P ×R × T

I = P x R x T

I = 460,500 x 20/100 x 21/12 (converting it to year)

I = 460,500 x 0.2 x 1.75

I = 161,175

Therefore, the person is going to remunerate ₱161,175

The tool is not just useful for borrowers and lenders; simple interest is a topic covered in school, so it might be utilized by both students and instructors.

Complex questions on the topic are sometimes asked in a classroom context, and the tool can also solve them, but how can we utilize the technology here? It is accomplished by understanding how to correctly enter your data. Some calculators provide step-by-step answers, while others will solve and show you how much you are paying back on your mortgage each year, month, and even daily.

Let's look at this **example**:

A man deposits ₱30,000 in the State Bank of the Philippines for 3 years, which earns him an interest of 8%. Calculate the amount he gets after one year, two years, and three years using the simple interest calculator.

You do not have to start working out the amount he gets for each year, the calculator does it and shows you each step it uses:

Firstly, input the data correctly in the calculator;

For every ₱100, he gets ₱8. (Since the rate is 8% → 8 for every 100)

Therefore, for ₱1 he gets = ₱8/100

And for ₱30,000 he gets = 30,000 x 8/100 = ₱2,400

Simple interest for 1 year = ₱2,400.

Simple Interest for 2 year = ₱2,400 x 2 = ₱4,800

Simple Interest for 3 year = ₱2,400 x 3= ₱7,200

Therefore, the amount he gets after 1 year = principal (P) + simple interest (S.I.)

= 30,000 + 2,400 = ₱32,400

The amount he gets after 2 years = principal (P) + simple interest (S.I.)

= 30,000 + 4,800 = ₱34,800

The amount he gets after 3 years = principal (P) + simple interest (S.I.)

= 30,000 + 7,200 = ₱37,200

So we can see from the above example that the calculator can solve complex problems too.