Simple Interest is calculated only on the original principal — interest never earns interest. The formula is SI = P × R × T / 100, where R is the annual rate and T is the time in years.

Where you'll see it: short-term consumer loans, some auto and personal loans (especially in markets where lenders quote a 'flat rate'), Treasury bills, and many fixed deposits that pay interest out instead of reinvesting.

Where you won't: savings accounts, mutual funds, EPF/PPF, recurring deposits — these all compound. Comparing a compounding product to a simple-interest one using the same headline rate badly underestimates the compounding side.

Tip: when a lender quotes a 'flat 10%' loan, the effective reducing-balance APR is roughly double — around 18–20%. Always convert to reducing-balance before comparing.

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