Interest Calculator – Simple & Compound Interest
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What Is an Interest Calculator?
This interest calculator compares simple interest and compound interest side by side, so you can clearly see the difference in how much your money grows under each method over the same time period.
Formulas Used
Simple Interest: I = P × r × t
Compound Interest (annual): A = P(1 + r)^t
Where P is the principal, r is the annual interest rate (as a decimal), and t is the time in years. Simple interest is calculated only on the original principal, while compound interest is calculated on the principal plus previously earned interest.
How to Use This Calculator
Enter your principal amount, the annual interest rate, and the time period in years. Click "Calculate Interest" to see both simple and compound interest results side by side.
Simple vs. Compound — Which One Applies to You?
Simple interest is common for short-term loans and some bonds. Compound interest applies to most savings accounts, investments, and credit cards. For a more detailed compound interest projection with monthly contributions and different compounding frequencies, use our Compound Interest Calculator.
Frequently Asked Questions
Why does compound interest earn more than simple interest?
Compound interest earns "interest on interest" — each period's earnings get added to the principal, so future interest is calculated on a larger base.
Is my savings account simple or compound interest?
Almost all savings accounts and investment accounts use compound interest, typically compounded daily or monthly.
Does a higher interest rate always mean more money?
Yes, all else equal, but the compounding method and time period matter just as much — a lower rate compounded frequently over a long period can outperform a higher simple interest rate.
How is loan interest usually calculated?
Most loans, including mortgages and auto loans, use amortized interest, which is a form of compound interest applied to a declining balance.