Compound Interest vs Simple Interest Calculator
Compare simple interest with compound interest using the same principal, rate and timeline. This page is built for the exact “simple vs compound interest” intent.
Simple vs compound formula
When the gap becomes large
- Longer time. Compounding needs time to show its strength.
- Higher rate. More growth means more interest can earn interest.
- More frequent compounding. Monthly or daily compounding can lift the result slightly versus annual compounding.
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FAQ
What is simple interest?
Interest calculated only on the starting principal.
What is compound interest?
Interest calculated on the principal plus previously earned interest.
Which is better for savings?
Compound interest is usually better for savings and investing because growth can build on itself.
Compound vs simple interest: the gap over 30 years
Simple interest is paid only on the original principal. Compound interest is paid on the principal plus previously earned interest. On $10,000 at 6%, simple interest adds a flat $600 a year, while compound interest accelerates — after 30 years the difference is $29,435.
| Year | Simple | Compound | Difference |
|---|---|---|---|
| 0 | $10,000 | $10,000 | $0 |
| 10 | $16,000 | $17,908 | $1,908 |
| 20 | $22,000 | $32,071 | $10,071 |
| 30 | $28,000 | $57,435 | $29,435 |
Simple vs compound: quick answers
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal. Compound interest is calculated on the principal plus accumulated interest, so it grows faster over time.
Is compound interest always better?
For a saver or investor, yes. For a borrower it is worse, because the debt grows on itself too.
When does the gap become large?
It widens with time and rate. Over decades, compound interest can be worth many times the simple-interest total.
Which do banks use?
Most savings accounts and investments use compound interest; some loans and bonds use simple interest. Always check the terms.