Compound Interest Calculator
Calculate compound interest with different compounding frequencies. Compare compound vs simple interest with year-wise breakdown.
Compound vs Simple Interest
| Year | Compound | Simple | Difference |
|---|---|---|---|
| Year 1 | ₹1,12,683 | ₹1,12,000 | ₹683 |
| Year 2 | ₹1,26,973 | ₹1,24,000 | ₹2,973 |
| Year 3 | ₹1,43,077 | ₹1,36,000 | ₹7,077 |
| Year 4 | ₹1,61,223 | ₹1,48,000 | ₹13,223 |
| Year 5 | ₹1,81,670 | ₹1,60,000 | ₹21,670 |
| Year 6 | ₹2,04,710 | ₹1,72,000 | ₹32,710 |
| Year 7 | ₹2,30,672 | ₹1,84,000 | ₹46,672 |
| Year 8 | ₹2,59,927 | ₹1,96,000 | ₹63,927 |
| Year 9 | ₹2,92,893 | ₹2,08,000 | ₹84,893 |
| Year 10 | ₹3,30,039 | ₹2,20,000 | ₹1,10,039 |
Frequently Asked Questions
What is compound interest?
Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. Formula: A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, t is years.
How does compounding frequency affect returns?
More frequent compounding yields higher returns. Daily > Monthly > Quarterly > Yearly. However, the difference is marginal — monthly vs daily compounding difference is negligible for most investments.
What is the Rule of 72?
Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 12% return, money doubles in ~6 years (72/12). At 8%, it takes ~9 years.
How is compound interest different from simple interest?
Simple interest is calculated only on the principal. Compound interest is calculated on principal + accumulated interest. Over long periods, the difference is enormous due to the snowball effect.
What is the power of compounding?
Small differences in rate or time create huge differences in outcome. ₹1 lakh at 12% for 30 years = ₹30 lakh. At 15% for 30 years = ₹66 lakh. Just 3% difference, but 2x the final amount.