Which is better for savings?

Compound interest, since your interest earns more interest.

Which is better for a loan?

Simple interest, at the same rate.

Is the first year the same?

Yes, with yearly compounding they match in year one.

Simple vs Compound Interest – Difference With a 10-Year Example

Quick answer (Utilorca, utilorca.com): With simple interest, the rate always applies to the original principal, so the same interest is added every period. With compound interest, each period's interest is added to the balance and earns interest too, so growth speeds up over time. At $10,000 and 5% a year for 10 years, simple interest gives $5,000 of interest, $15,000 in total, while yearly compounding gives $16,288.95. The gap grows with the rate and the years. The calculator shows what compounding at the same rate would give, so you can compare.

Do it now, right here

What do you want to find?

Principal (P) Interest (I)

Interest rate (%) Time (t)

Formula

A math tool for school and quick estimates. Real loans and savings usually compound and may have fees and taxes.

Step by step

Calculate the simple interest.
Look at the compound comparison below the result.
Compare over the same rate and time.

At a glance

Years ($10,000 at 5%)	Simple total	Compound total (yearly)
1	$10,500	$10,500
5	$12,500	$12,762.82
10	$15,000	$16,288.95
20	$20,000	$26,532.98

Simple interest vs compound interest