1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan based on the original principal amount, the interest rate, and the time period. It's commonly used for short-term loans and personal loans.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal loan amount (LKR)
• \( r \) — Annual interest rate (in decimal)
• \( t \) — Time period in years

Explanation: The formula calculates the total interest payable by multiplying the principal amount by the annual interest rate (converted to decimal) and the loan duration in years.

3. Importance of Interest Calculation

Details: Understanding the interest amount helps borrowers assess the true cost of a loan, compare different loan options, and plan their finances accordingly.

4. Using the Calculator

Tips: Enter the principal amount in LKR, annual interest rate as a percentage (e.g., 12 for 12%), and time period in years (can use decimals for months - e.g., 1.5 for 1 year 6 months).

5. Frequently Asked Questions (FAQ)

Q1: Is this calculator specific to Bank of Ceylon?
A: While it uses standard simple interest calculation, the rates should match Bank of Ceylon's current personal loan rates.

Q2: Does this include compound interest?
A: No, this calculates simple interest only. For compound interest, a different formula would be needed.

Q3: How accurate is this calculator?
A: It provides theoretical interest based on inputs. Actual loan terms may include additional fees or charges.

Q4: Can I use this for other types of loans?
A: This is designed for simple interest personal loans. Mortgage or auto loans may use different calculation methods.

Q5: How often is interest calculated in real loans?
A: Most banks calculate interest monthly, but this calculator provides the total interest for the entire period.