Compound Interest
Interest calculated on both the original principal and any interest that has already accrued, causing the total owed to grow faster over time than simple interest.
Because compound interest builds on previously accrued interest, not just the original principal, the longer a compounding debt goes unpaid, the faster the total balance can grow compared to a simple interest structure.
Compounding frequency (daily, monthly, or annually) affects how quickly this growth happens, so understanding how often interest compounds on a given product matters when comparing the true cost of financing.
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