Interest calculator — monthly or yearly rate, simple or compound
“Do rupiya vyaj” means ₹2 per ₹100 per month. That is 2% a month, which is 24% a year — not 2% a year. People who get this wrong are usually not being cheated; they are reading a monthly rate as an annual one, and the gap between the two is twelve-fold.
By Khatamel · · Free, no account
- Interest
- ₹1,200.00
- Interest per month, on average
- ₹200.00
A monthly rate is not an annual rate
Rates on hand loans are almost always spoken per month in India — one rupee, two rupees, sometimes five. Bank rates are quoted per year. The same words describe wildly different money, so the first thing this calculator asks is which one you were told.
₹10,000 at 2% a month for six months is ₹1,200 of simple interest. The same ₹10,000 at 2% a YEAR for six months is ₹100. If you are comparing an offer from a lender against a bank, convert both to the same period before you compare anything at all.
Simple and compound, and which one you agreed to
Simple interest is charged on the original amount every month. Compound interest is charged on the amount plus the interest already added, so it grows on itself.
Over six months at 2% a month the difference on ₹10,000 is ₹1,200 against about ₹1,262 — small. Over three years it stops being small: ₹7,200 against roughly ₹10,300. The longer the loan runs, the more it matters which of the two was actually meant.
- Most short hand loans between people are simple interest.
- Anything that rolls over month after month without being settled usually ends up compounding, whether or not anybody used that word.
- If nobody said, the answer is to agree it now, in writing, before it is an argument about a number.
Write the terms down before the first rupee moves
Four things settle almost every later dispute: the amount, the rate with its period (“2% per month”, not “2%”), whether it is simple or compound, and the date it started. Written once, at the start, they take a minute.
Recorded afterwards, from memory, each one is a negotiation — and the person with the better memory is rarely the person who is right.
What this does not do
It does not tell you what rate is fair or lawful. Lending between individuals is regulated differently from lending by a licensed lender, and there are limits in some states on what may be charged.
It assumes nothing is repaid part-way. If instalments are being paid against the principal, the EMI calculator is the sum you want instead.
Common questions
What does “two rupees interest” mean?
₹2 per ₹100 per month — that is 2% a month, or 24% a year. It is a monthly rate, which is why it sounds smaller than it is.
How do I convert a monthly rate to a yearly one?
For simple interest, multiply by 12: 2% a month is 24% a year. If it compounds monthly the annual figure is higher still, because each month's interest earns interest of its own.
What is the simple interest formula?
Interest = principal × rate × time, with the rate and the time in the same period. ₹10,000 at 2% a month for 6 months is 10,000 × 0.02 × 6 = ₹1,200.
Simple or compound — which applies to a loan between two people?
Whichever the two of you agreed. Most short hand loans are simple. A loan that rolls over unpaid for months usually ends up compounding in practice, so it is worth settling the point in writing at the start.
Does this page keep my figures?
No. It calculates in your browser, saves nothing and sends nothing anywhere.
Read next
- Money promised is not money receivedA balance that counts advances, uncleared cheques and part-payments tells you about money you cannot put your hand on. How to write a promise down without letting it into the total.
- Four rules for a ledger more than one person writes inThe date, the note, the missing name, and one payment recorded twice from opposite ends — the four places a book with several writers breaks, and what each one costs.