Simple & Compound Interest Calculator
Understanding Interest
Interest is the cost of borrowing money or the return on lending money. It is essentially the price paid for the use of someone else's money.
Simple Interest
Calculated only on the principal amount. The interest amount remains constant for each period.
Formula: (P × R × T) / 100
Compound Interest
Calculated on the principal amount and also on the accumulated interest of previous periods.
Formula: P × (1 + R/n)^(nt) - P
Frequently Asked Questions
Because you earn interest on interest. Over long periods, this "compounding" effect adds up
significantly.
It is often used for short-term loans, car loans (flat rate), or informal lending.