Simple & Compound Interest Calculator
Understanding Simple and Compound Interest
When it comes to growing your money whether it's through savings, investments, or even loans the concepts of Simple Interest and Compound Interest are key. But don’t worry, you don’t need to be a finance expert to understand them. Let’s break it down in simple terms.
💡 What is Simple Interest?
Simple Interest is just what it sounds like simple. You earn interest only on the original amount you invested or borrowed, which is called the principal. It doesn’t change over time.
For example, if you put ₹10,000 in a savings plan at 5% interest for 2 years, you'll earn:
₹10,000 × 5% × 2 = ₹1,000
So, after 2 years, you’ll have ₹11,000 in total.
🔁 What is Compound Interest?
Compound Interest is where things get a little more exciting. Here, you earn interest not just on your original amount, but also on the interest that gets added over time. It’s like earning "interest on your interest".
Using the same example, if you invest ₹10,000 at 5% compound interest for 2 years, the interest is calculated like this:
- After Year 1: ₹10,000 × 5% = ₹500 → Total = ₹10,500
- After Year 2: ₹10,500 × 5% = ₹525 → Total = ₹11,025
See the difference? With compounding, you earn slightly more every year and that adds up in the long run!
📊 Why Does It Matter?
Whether you're saving money, investing, or taking a loan, understanding how interest works can help you make better decisions. Compound interest helps your savings grow faster, but it can also make loans more expensive if you're on the paying side.
That’s why we created the calculator below so you can quickly see the difference between simple and compound interest, and understand what your money is really doing over time.
🧮 Try It Yourself!
Use the calculator below to find out how much interest you’ll earn (or pay) based on your amount, interest rate, and time period. It’s quick, simple, and free!