Simple vs Compound Interest Calculator
Compare simple and compound interest using the same principal, rate and term.
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Method
How it works
The simple interest formula applies the annual rate only to the original principal for each year. The compound interest formula divides the annual rate by the selected frequency and repeatedly applies it to the growing balance.
The calculator uses the same principal, annual rate and term on both sides, then shows each ending value and the interest-on-interest difference. Additional deposits, tax and fees are excluded.
Common questions
Frequently asked questions
What is the simple interest formula?
Ending value equals principal multiplied by one plus the annual rate multiplied by the number of years.
What is the compound interest formula?
Ending value equals principal multiplied by one plus the periodic rate, raised to the total number of compounding periods.
Why does compound interest usually exceed simple interest?
Compound interest earns returns on earlier interest, while simple interest continues to use only the original principal.
How does compounding frequency change the result?
The annual rate is divided and applied more often, which changes the effective growth over the term.
Not financial advice. This calculator is for general informational purposes only. Check figures independently before making financial decisions.