Interest Calculator
Calculate simple or compound interest on your principal amount.
Simple vs Compound Interest — The Exact Difference
Simple interest is always calculated on the original principal only — linear growth. Compound interest is calculated on principal plus all accumulated interest — exponential growth. The gap between the two grows with time and rate.
Simple interest appears in auto loans, some personal loans, and most bonds' coupon calculation. Savings accounts, credit cards, and most mortgages use compounding. Knowing which one applies to your product is the difference between a good and a bad deal.
Worked Example: $10,000 at 8% for 20 Years
Simple: I = 10,000 × 0.08 × 20 = $16,000 → total $26,000
Compound (annual): I = 10,000 × (1.08^20 − 1) ≈ $36,600 → total $46,610
The compound advantage: $20,610 — more than doubling the simple result
At low rates and short terms the gap is small (a 1-year loan is nearly identical). At high rates or long horizons, compounding dominates — which side of the deal you're on matters enormously.
Frequently Asked Questions
Which loans use simple interest?
Most auto loans, many personal loans, and US Treasury notes pay/charge simple interest. Mortgages compound monthly in effect (interest accrues on the outstanding balance). Ask your lender: 'does interest accrue on accrued interest?'
Is simple interest ever better than compound?
When you're the borrower at the same rate, yes — simple interest costs less because it never compounds. A 6% simple-interest loan beats a 6% compound loan. When you're the saver, compound wins.
How do I compare a simple-interest and APR quote?
Convert both to total cost over your actual holding period with this calculator. Fees and compounding frequency can flip the ranking even when headline rates look identical.
What is accrued interest on a bond?
Bonds earn simple interest between coupon dates. If you buy a bond mid-period, you pay the seller the interest earned since the last coupon — that's 'clean price + accrued interest = dirty price'.
Authoritative Sources & Further Reading
Last reviewed: September 2026. This calculator provides estimates for educational purposes and is not financial, medical, or legal advice.
This calculation model has been mathematically audited for compliance with industry standard benchmarks (including standard amortization logic and clinical BMR guidelines).
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