Interest is basically the extra sum of money that is derived from a previously agreed percentage, when a loan is taken. Every month that you don’t pay the money you will have to pay interest plus the original sum. There are two basic types of interest. Simple interest is when you only have to pay a fixed extra amount every month which was derived from the original amount.
However, compound interest is a percentage that is deducted from the original amount as well as the accumulated interest that has been collected as the added interests. Hence, compound interest progressively grows larger over time.
Simpleinterest is charged only on the principal amount.Compound interestis charged on the principal plus any interest accrued till the point of time at which interest is being calculated.
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