Loans, deposits and EMIs all depend on how interest grows over time. Simple interest is earned only on the principal, while compound interest is also earned on past interest, so it grows faster. Use simple interest when the question says so or when interest is not added back, and compound interest for yearly or half-yearly compounding. Tests often ask for the difference between CI and SI, and there are shortcuts for 2 and 3 years that save a lot of time.