💵 Interest Calculator
Simple vs Compound Interest
Simple interest is calculated only on the principal: I = P × r × t. Compound interest is calculated on principal plus accumulated interest: A = P(1 + r/n)^(nt). Compound interest grows faster than simple interest over time.
Frequently Asked Questions
Simple interest is calculated only on the original principal: Interest = P × r × t. Compound interest is calculated on the principal plus accumulated interest, so it grows exponentially over time. For savings, compound is better for you; for debt, simple is better.
Simple Interest = Principal × Rate × Time. Example: $10,000 at 5% for 3 years = $10,000 × 0.05 × 3 = $1,500 in interest. Total amount = $11,500. Simple interest is commonly used for short-term loans, car loans, and some personal loans.
A = P(1 + r/n)^(nt), where A is the final amount, P is principal, r is annual rate, n is compounding frequency per year, and t is years. More frequent compounding (daily vs annually) produces slightly more interest due to the compounding effect.