Simple vs. Compound Interest Calculator

In school, we learned both simple and compound interest. Most of us forgot compound interest mattered. The banks, insurance companies, and smart investors did not.

Simple interest pays you the same interest amount every period, calculated only on the original principal. ₹1 lakh at 10% simple interest for 20 years = ₹3 lakhs. Compound interest pays you interest on the interest, so your interest base grows every period. ₹1 lakh at 10% compound interest for 20 years = ₹6.73 lakhs — more than double the simple interest outcome.

Over 30 years, the gap becomes almost mythological: ₹1 lakh at 10% simple = ₹4 lakhs. At 10% compound = ₹17.45 lakhs. The same money. The same rate. The same time. Just a different mathematical rule changes the outcome by 4x.

In the real world: FDs typically use compound interest (quarterly or monthly compounding). Loans use reducing balance EMI calculations which are a form of compound interest working against you. The more frequently your money compounds (daily > monthly > quarterly > annually), the faster it grows.

Albert Einstein may or may not have called compound interest "the eighth wonder of the world," but the math speaks for itself. Understand it viscerally, not just intellectually.