1) Rate of interest offered.
2) How is the interest calculated.
Answers
Simple Interest Formula:
Simple interest is a method of calculating the interest that is charged on fixed deposits, savings accounts, and loans. It is calculated on the principal amount. Simple interest does not add any interest rate on the interest amount gathered on the principal amount.
The formula for calculating simple interest is:
(P x r x t) ÷ 100
P = Principal
r = Rate of Interest
t = Term of the loan/deposit in years
This means that you are multiplying the principal amount with the rate of interest and the tenure of the loan or deposit. Make sure you enter the tenure in years and not months. If you are entering the tenure in months, then the formula will be:
(P x r x t) ÷ (100 x 12)
If you want to find the total amount – that is, the maturity value of a deposit or the total amount payable including principal and interest, then you can use this formula:
FV = P x (1 + (r x t))
Here, FV stands for Future Value. To get the interest payable or receivable, you can subtract the principal amount from the future value.
Let's give you some examples to understand how much you will earn on your deposits, or how much you will have to pay on your loan if your bank uses simple interest.