Simple & compound interest calculator
Enter an amount, rate, and time to see both simple and compound interest, and how much the gap between them adds up to.
This tool involves interest (riba) and is shared for educational and informational purposes only — it is not financial advice. Interest-based finance is not permissible in Islam; please consider Shariah-compliant alternatives.
The two formulas
Simple interest stays flat each year. Compound interest keeps adding earlier interest back to the balance, so the longer the time and the higher the rate, the wider the gap between the two.
FAQs about interest
What is the difference between simple and compound interest?
Simple interest is earned only on the original amount each year. Compound interest is earned on the original amount plus the interest already added, so it grows faster over time.
How is simple interest calculated?
Simple interest is P × r × t ÷ 100, where P is the principal, r is the yearly rate, and t is the time in years. The total amount is the principal plus that interest.
How is compound interest calculated?
Compound interest uses A = P × (1 + r/n)^(n×t), where n is how many times a year interest is added. The interest is the final amount A minus the principal.
Why does compound interest grow faster?
Because each period the interest is added to the balance, so the next period earns interest on a bigger amount. Over many years this snowball effect becomes large.
Does compounding frequency matter?
Yes. For the same yearly rate, monthly compounding gives a little more than quarterly or yearly, since interest is added back to the balance more often.