Interest is a fee charged by lenders to borrowers for the use of their money. There are two types of interest: simple and compound. This article will discuss the differences between them, including how they are calculated, when they are used, and their advantages and disadvantages.
About The Difference Between Simple Interest And Compound Interest
|Simple Interest||Interest is calculated on the initial principal only.|
|Compound Interest||Interest is calculated on both the initial principal and accumulated interest from previous periods.|
|Frequency of Accrual||Simple interest accrues at regular intervals.|
|Compound interest accrues more frequently.|
|Payment Schedule||Simple interest payments are fixed.|
|Compound interest payments vary.|