Interest is the cost of borrowing money or the return on lending/investing money. When you take a loan, you pay interest to the bank. When you deposit money in FD or savings account, you earn interest. Understanding how interest works - especially simple interest vs compound interest - helps you make better financial decisions about loans, investments, and savings products.
For FY 2025-26, interest rates vary widely based on the product. Savings bank accounts offer 4-6% annually, fixed deposits offer 6-8%, small savings schemes like PPF offer 7-8%, and equity investments can give 10-15% long-term. On the loan side, home loans are around 8-9%, personal loans can go up to 18-24% depending on your credit score. The power of compounding means even a small interest rate difference can make a huge impact over long periods - that's why saving early and investing wisely matters so much.
Our interest calculator helps you understand both scenarios: As a borrower, you'll see how much interest you're paying on your loans (check your EMI breakdown to see interest vs principal split). As an investor, you'll see how much your money grows through interest over time. For long-term savings, consider PPF and FD for guaranteed returns, or SIPs for potentially higher returns with some risk.
Many people don't realize that the interest you pay on loans is often much higher than the interest you earn on savings. A personal loan at 18% costs you ₹18,000 per year on ₹1 lakh, while your FD might give you just ₹6,000 per year on the same amount. That's a massive difference. Understanding this helps you prioritize paying off high-interest debt before investing, even if you're eligible for Section 80C tax benefits.
Choose between Simple Interest (interest on principal only) or Compound Interest (interest on principal + accumulated interest).
For compound interest, select how often interest is compounded: annually, semi-annually, quarterly, monthly, or daily.
Input the principal amount, annual interest rate, and time period in years. All values should be positive numbers.
Press "Calculate Interest" to get instant results with detailed breakdown and visual comparisons.
Check the summary cards, detailed breakdown, and charts to understand the difference between simple and compound interest.
Use the comparison charts to see how different time periods and compounding frequencies affect your returns.
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any previously earned interest. Compound interest grows exponentially over time, making it more beneficial for long-term investments.
Higher compounding frequency (more frequent compounding) results in higher returns. Daily compounding gives the highest returns, followed by monthly, quarterly, semi-annually, and annually.
Compound interest is generally better for investments as it allows your money to grow exponentially. However, simple interest might be preferred for short-term investments or when you need predictable returns.