Simple vs Compound Interest — which one does your loan use?
Most Indian education loans use compound interest on a monthly reducing balance. Understanding the difference helps you compare loan offers accurately — and avoid surprises.
Calculate and compare
Compound interest calculated annually for comparison. Actual education loans use monthly reducing balance — your EMI calculator shows the real EMI.
Education loans in India typically use compound interest on monthly reducing balance. The actual extra cost is lower than pure compound if you pay EMIs regularly — use our EMI calculator for exact numbers.
Simple vs Compound — the key difference
Simple Interest (SI)
Interest is calculated only on the principal — the amount you borrowed. It stays the same every year.
SI = (P × R × T) / 100
Compound Interest (CI)
Interest is calculated on principal + accumulated interest — "interest on interest." This is what most education loans use.
A = P × (1 + R/N)^(N×T)