Simple Interest vs Compound Interest: What Is the Difference?
Simple interest is calculated only on the original principal, while compound interest can also earn interest on interest already added. That difference becomes more important as time increases.
Simple interest formula
Simple Interest = Principal × Rate × Time. If 100,000 is invested at 10% per year for 3 years, simple interest is calculated on the same original 100,000 each year.
Use the Simple Interest Calculator to check principal, rate and time quickly.
How compound interest works
With compounding, interest is added to the balance and future interest can be calculated on the larger amount. The compounding frequency—yearly, monthly or another interval—can affect the result.
The Compound Interest Calculator is useful for savings growth, investment projections and understanding long-term borrowing costs.
Which one is better?
Neither is automatically better. For a saver, compounding can accelerate growth. For a borrower, compounding can increase the total cost. The correct comparison depends on rate, time, payment schedule and fees.
Related calculators
For regular loan payments use the Loan Calculator or EMI Calculator. For savings goals, try the Savings Calculator.