📈 Interest Calculator

Understanding Interest: Simple vs. Compound

Interest is the cost of borrowing money or the reward for saving. It’s calculated on the principal amount and can be either simple interest or compound interest.

📘 What is Simple Interest?

Simple interest is calculated only on the original principal. It stays the same each year and doesn’t account for previously earned interest.

Formula: SI = (P × R × T) / 100

• P = Principal Amount
• R = Annual Interest Rate
• T = Time in Years

📈 What is Compound Interest?

Compound interest is calculated on both the principal and accumulated interest. It helps your money grow faster over time.

Formula: A = P × (1 + R/N)N×T

• P = Principal Amount
• R = Annual Interest Rate (in decimal)
• N = Compounding frequency per year
• T = Time in Years
• A = Final Amount (Principal + Interest)

🧮 Example

• 💰 ₹1,00,000 at 10% simple interest for 3 years earns ₹30,000.
• 📊 ₹1,00,000 at 10% compound interest for 3 years (annual compounding) grows to ₹1,33,100.

💡 When to Use This Calculator

• 🏦 Estimating interest on loans from banks or NBFCs
• 📈 Calculating returns on FDs, savings, or bonds
• 🎓 Learning or teaching how interest works
• 📅 Planning investments for future financial goals

❓ Frequently Asked Questions (FAQs)

1. What’s the difference between simple and compound interest?

Simple interest is calculated only on the principal. Compound interest includes both the principal and accumulated interest, growing your money faster.

2. How often is compound interest applied?

It can be applied yearly, half-yearly, quarterly, monthly, or even daily. The more frequent the compounding, the higher the returns.

3. Is compound interest better for long-term savings?

Yes, compound interest benefits long-term investments by growing exponentially over time.

4. Can this calculator be used for loans?

Yes, it works for both savings and loans—just choose the right interest type and enter your values.

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