Calculate simple and compound interest with detailed breakdowns. Compare growth over time with customizable compounding frequency.
| Year | Simple Interest Amount | Compound Amount | Difference |
|---|
Simple Interest: SI = P × r × t
Where P = principal, r = annual interest rate, t = time in years
Compound Interest: A = P × (1 + r/n)^(n×t)
Where P = principal, r = annual interest rate, n = compounding frequency, t = time in years
Compound Interest = A - P
An interest calculator helps you compute the interest earned or paid on a principal amount over a given time period at a specified rate. Whether you are calculating returns on savings, FD interest, loan costs, or investment growth, our online interest calculator gives you instant, accurate results for both simple and compound interest.
Simple Interest (SI) = Principal × Rate × Time / 100. For example, if you invest Rs. 50,000 at 8% per annum for 3 years: SI = 50,000 × 8 × 3 / 100 = Rs. 12,000. Total amount = Rs. 62,000. Simple interest is used for short-term loans, vehicle loans, and personal loans in some cases.
Compound Interest is calculated on both the principal and accumulated interest. Formula: A = P × (1 + r/n)^(n×t), where P is principal, r is annual rate, n is compounding frequency per year, and t is time in years. The more frequently interest compounds, the more you earn. Most savings accounts, FDs, and investments use compound interest.
Compound interest grows significantly faster than simple interest over time due to the "interest on interest" effect. On a Rs. 1,00,000 investment at 10% for 10 years: Simple Interest gives Rs. 1,00,000 profit (Rs. 2,00,000 total), while Compound Interest gives Rs. 1,59,374 profit (Rs. 2,59,374 total). This difference is why starting to invest early matters so much.
The Rule of 72 is a quick way to estimate how long it takes to double your money. Simply divide 72 by the annual interest rate. At 8% per year, your money doubles in 72/8 = 9 years. At 12%, it doubles in 6 years. This rule shows why higher-return investments and starting early are so powerful for long-term wealth building.
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus accumulated interest, meaning you earn "interest on interest" over time, leading to faster growth.
More frequent compounding (daily vs. annually) results in higher returns because interest is added to the principal more often, allowing it to compound more times. The difference is most significant at higher interest rates and longer time periods.
The Rule of 72 is a quick way to estimate how long it takes for an investment to double at a given interest rate. Divide 72 by the interest rate (as a percentage) to get the approximate number of years. For example, at 8% interest, money doubles in about 9 years (72 ÷ 8 = 9).
For borrowing, simple interest is generally better as it results in lower total payments. For investing/savings, compound interest is better as it maximizes growth. Most loans use compound interest, while some personal loans may use simple interest.
To maximize compound interest: start investing early (time is your biggest ally), choose higher interest rates, opt for more frequent compounding, reinvest all earnings, and make regular additional contributions to increase the principal.
