Simple & Compound Interest Calculator
Enter a principal, rate and time period to see simple interest and compound interest calculated side by side, so you can see exactly how much compounding adds.
The two formulas
Simple interest is calculated only on the original principal for the whole period: SI = P × R × T ÷ 100. Compound interest is calculated on the principal plus any interest already earned, recalculated each compounding period: CI = P × (1 + r/n)n×t − P, where n is the number of times interest compounds per year. Over short periods or low rates the difference is small; over long periods it grows substantially.
Where each applies
- Simple interest is common for short-term loans and some bonds
- Compound interest is standard for savings accounts, fixed deposits, and most investment growth
- The more frequently interest compounds (monthly vs. annually), the higher the final amount for the same nominal rate
Frequently asked questions
What's the difference between simple and compound interest?
Simple interest is calculated only on the original principal for the entire period, so it grows at a constant rate. Compound interest is recalculated on the principal plus previously earned interest each period, so it grows faster the longer the money is invested.
Which grows faster, simple or compound interest?
Compound interest always produces an equal or higher total over time (they're identical only in the first compounding period), and the gap widens the longer the time period and the more frequently interest compounds.
What does compounding frequency mean?
It's how often interest is calculated and added to the principal within a year — annually, quarterly, or monthly are common. More frequent compounding produces a slightly higher final amount for the same nominal annual rate.
Which one applies to my savings account or loan?
Most savings accounts, fixed deposits, and loans use compound interest; some short-term loans or specific bond structures use simple interest. Check your account or loan terms to see which applies — the same numbers can produce noticeably different results.