Simple vs. Compound
Interest Comparison
Which one earns you more? Use our advanced comparison hub to see exactly how much your money grows when you switch from simple to compound growth.
The Great Interest Debate: SI vs. CI
In the world of finance, interest is the price of money. Whether you are an investor looking for growth or a borrower looking for the cheapest debt, understanding the difference between Simple Interest (SI)and Compound Interest (CI) is vital for your financial health.
Simple Interest
Calculate interest 100% on the original principal. The amount of interest stays constant every month or year. It is predictable but lacks the "accelerator" of modern finance.
Compound Interest
Interest is added back to the principal, and next period's interest is calculated on the new higher balance. This creates exponential growth that leaves simple interest in the dust over 5+ years.
The "Compounding Bonus" Comparison
Consider an investment of ₹1,00,000 at 10% for 10 years:
| Period | Simple Interest | Compound Interest |
|---|---|---|
| After 1 Year | ₹1,10,000 | ₹1,10,000 |
| After 5 Years | ₹1,50,000 | ₹1,61,051 |
| After 10 Years | ₹2,00,000 | ₹2,59,374 |
* Note how the gap grows from ₹0 to nearly ₹60,000 in just 10 years. This is the "Compounding Bonus."
How to Choose Between SI and CI?
As an Investor: Always choose Compound Interest. It ensures your money grows faster the longer you stay invested. Even a small difference in the "Compounding Frequency" (like Monthly vs. Yearly) can add up to thousands of rupees over time.
As a Borrower: Aim for Simple Interest loans whenever possible. Modern home loans and credit cards almost always use compound interest, which is why debt can feel like a trap. If you have a choice, a flat-rate simple interest loan is usually more transparent.
Adjusting for the "Scary Truth" (Inflation)
While ₹2,59,000 looks great in 10 years, you must consider that ₹100 today won't buy as much in 2036. Our specialized **Inflation Toggle** allows you to see the "Real Purchasing Power" of your final wealth, ensuring your financial planning is grounded in reality, not just high numbers.