Interest Calculator — Simple vs Compound Compared

Enter Parameters

Adjust sliders or type values directly

Principal Amount

Annual Interest Rate

Time Period (Years)

years

Compounding Frequency

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Adjust parameters to see instant results

AI Summary & Key Formula

Interest Calculator Quick Reference

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Quick Answer

An interest calculator compares simple interest, I = P × r × t, with compound interest, A = P × (1 + r/n)^(n × t), where n is how many times a year interest is added to the balance. For example, $5,000 at 6% for 5 years earns $1,500 of simple interest but $1,744 when compounded monthly, so compounding adds $244. Use it to compare savings accounts, fixed deposits and loans quoted with different compounding frequencies; it assumes a fixed rate, no deposits or withdrawals, and shows interest before tax.

How This Calculation Works

Values calculate dynamically in real-time as you enter figures or adjust sliders.
The equation on the right is exactly what the calculator runs — check any result by hand.

Core Equation

Simple Interest:
  I = P × r × t
  A = P + I
  Where r = annual rate as decimal, t = time in years

Compound Interest:
  A = P × (1 + r/n)^(n×t)
  I = A − P
  Where n = compounding periods per year

Effective Annual Rate (EAR):
  EAR = (1 + r/n)ⁿ − 1

How to Use the Interest Calculator

Quick 3-step guide for accurate and fast calculations

STEP 01

Enter your principal amount

In the Interest Calculator, fill in Principal Amount, Annual Interest Rate, Time Period (Years) and Compounding Frequency.

STEP 02

Read your compound interest earned

The Interest Calculator instantly shows Compound Interest Earned, Total Amount (Compound), Simple Interest Equivalent and Total Amount (Simple), updating as you type.

STEP 03

Compare scenarios

Change Annual Interest Rate to see how it affects Compound Interest Earned, then check the formula below to verify the math.

Specific Instructions:

Enter the principal amount, annual interest rate, and time period in years. For compound interest, select the compounding frequency — annually, semi-annually, quarterly, monthly, or daily. The calculator shows the final balance and total interest for both simple and compound methods, and the compound advantage over the period.

Interest Calculator Formula

The Interest Calculator uses the following formula, calculated in your browser as you change the inputs:

Simple Interest: I = P × r × t A = P + I Where r = annual rate as decimal, t = time in years Compound Interest: A = P × (1 + r/n)^(n×t) I = A − P Where n = compounding periods per year Effective Annual Rate (EAR): EAR = (1 + r/n)ⁿ − 1

Sources:

Worked Example: Interest Calculator

Principal: $5,000 | Rate: 6% p.a. | Time: 5 years Simple Interest: I = 5,000 × 0.06 × 5 = $1,500 | Total = $6,500 Compound (Monthly): A = 5,000 × (1 + 0.06/12)⁶⁰ = $6,744.25 Compound Advantage: $244.25 more than simple interest

Calculations run in your browser — your inputs are never stored on our servers.Formula sources & methodology

Guide

Simple vs Compound Interest: The Difference Explained

Simple interest is calculated only on the original principal, using SI = P × R × T ÷ 100, while compound interest is calculated on the principal plus interest already earned, using A = P(1 + r/n)^(nt). At 8% for 5 years, ₹1,00,000 earns ₹40,000 as simple interest but about ₹46,933 with annual compounding, and the gap widens every year.

Frequently Asked Questions — Interest Calculator

What is the difference between simple and compound interest?

Simple interest is calculated only on the original principal. Compound interest is calculated on both the principal and the accumulated interest from previous periods. Over short periods the difference is small, but over years or decades compound interest leads to dramatically larger returns — or costs, in the case of loans.

How often does compound interest compound?

Common compounding frequencies are annual (1 time a year), semi-annual (2), quarterly (4), monthly (12) and daily (365). More frequent compounding means a higher effective annual rate, though the gains shrink at each step. For $100,000 at 8% for 10 years, interest is $115,892 compounded annually, $120,804 quarterly, $121,964 monthly and $122,535 daily. Many savings accounts compound daily or monthly, while many fixed deposits compound quarterly.

Do savings accounts use simple or compound interest?

Almost all savings accounts and fixed deposits use compound interest. However, some types of bonds and short-term instruments use simple interest. When comparing financial products, always check the effective annual rate (EAR) rather than the nominal rate, as EAR accounts for compounding frequency and enables a like-for-like comparison.