Simple Interest is a method to calculate the interest charged or earned on a principal amount over a certain period of time. It is calculated as a percentage of the principal amount and does not consider the effect of compounding.
While Simple Interest is calculated only on the principal amount, Compound Interest is calculated on the principal amount as well as the accumulated interest of previous periods. This means that Compound Interest grows faster than Simple Interest.
Simple Interest is calculated using the formula: \( \text{SI} = \frac{P \times R \times T}{100} \) where \( P \) is the principal amount, \( R \) is the rate of interest, and \( T \) is the time period in years.
Simple Interest is typically used for short-term loans or investments where interest is not compounded. It's straightforward and easier to calculate. For long-term investments or loans, Compound Interest might be more relevant as it considers the effect of compounding.
While the Simple Interest Calculator provides an estimate based on the inputs provided, it's essential to understand the broader financial context. It's always recommended to consult with a financial advisor or expert before making any financial decisions.