Interest Calculator
Compare Simple Interest vs Compound Interest.
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Simple Interest
Compound Interest
What is Simple & Compound Interest Calculator?
A Simple & Compound Interest Calculator helps you calculate and compare the returns on your investments or the interest payable on loans using both simple interest and compound interest methods. Understanding the difference between these two methods is crucial for making informed financial decisions.
Our calculator allows you to input the principal amount, interest rate, time period, and compounding frequency to see how much interest you'll earn (or pay) under both methods. This helps you understand the power of compounding and make better investment or borrowing decisions.
Simple Interest vs Compound Interest
- Simple Interest: Interest is calculated only on the principal amount. Formula: SI = (P × R × T) / 100
- Compound Interest: Interest is calculated on the principal plus accumulated interest. Formula: CI = P × (1 + R/n)^(n×T) - P
- Compounding Frequency: Interest can compound annually, semi-annually, quarterly, or monthly - more frequent compounding means higher returns
- Key Difference: Compound interest grows exponentially over time, while simple interest grows linearly
Advantages of Using Braihn's Interest Calculator
- ✓Side-by-Side Comparison
Compare simple interest vs compound interest returns instantly to understand the difference.
- ✓Flexible Compounding
Choose from annual, semi-annual, quarterly, or monthly compounding to see how frequency affects returns.
- ✓Accurate Calculations
Get precise interest calculations using standard formulas for both simple and compound interest.
- ✓Investment Planning
Understand how compounding can significantly increase your returns over time, helping you make better investment decisions.
- ✓Free Financial Tool
Calculate interest for investments and loans without any cost. No registration required - use our calculator anytime.
Frequently Asked Questions
What is the main difference between simple and compound interest?
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus previously earned interest. Over time, compound interest grows much faster than simple interest due to the "interest on interest" effect.
How does compounding frequency affect returns?
More frequent compounding (monthly vs annually) results in higher returns because interest is calculated and added more often. For example, ₹1 lakh at 10% for 1 year: Annual compounding = ₹1,10,000, Monthly compounding = ₹1,10,471.
Which investments use compound interest?
Most investments use compound interest including Fixed Deposits (quarterly compounding), PPF (annual compounding), Mutual Funds (daily compounding), and Savings Accounts (daily/monthly compounding). Simple interest is rarely used in modern financial products.
How can I maximize compound interest returns?
To maximize compound interest: (1) Start investing early to benefit from time, (2) Choose investments with higher interest rates, (3) Opt for more frequent compounding, (4) Reinvest your returns instead of withdrawing them, and (5) Invest regularly to benefit from compounding on multiple investments.
Is compound interest better for loans or investments?
Compound interest is beneficial for investments as it helps your money grow faster. However, for loans, compound interest means you pay more interest over time. Most loans use compound interest (reducing balance method), which is why paying off loans early saves significant interest.
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