Interest Calculator
Calculate simple and compound interest to see how your money grows over time. Compare both interest types side by side, understand the power of compounding, and see year-by-year breakdowns. Perfect for savings accounts, investments, loans, and financial planning.
How to Use This Interest Calculator
1. Enter your principal amount (the initial sum of money).
2. Input the annual interest rate as a percentage.
3. Set the time period and select the time unit (years, months, or days).
4. For compound interest, choose how often interest compounds (monthly, quarterly, etc.).
5. Optionally add regular contributions to see how additional deposits grow your money.
6. Click "Calculate Interest" to see results and compare simple vs compound interest.
What is Interest?
Interest is the cost of borrowing money or the reward for saving money. It is typically expressed as an annual percentage of the principal. There are two main types of interest: simple and compound, and understanding the difference is crucial for making smart financial decisions.
Simple Interest is calculated only on the original principal amount. It remains constant throughout the investment or loan period. Simple interest is commonly used for short-term loans, car loans, and some certificates of deposit.
Compound Interest is calculated on both the principal and the accumulated interest from previous periods. This "interest on interest" effect causes money to grow exponentially over time. Compound interest is used in most savings accounts, investment accounts, credit cards, and mortgages.
- The Rule of 72: Divide 72 by your interest rate to estimate how many years it takes to double your money with compound interest
- Frequency Matters: More frequent compounding (daily vs. monthly) results in more interest earned
- Time is Key: The longer your money compounds, the greater the difference between simple and compound interest
Interest Formulas
Simple Interest: I = P x r x t
Where: I = Interest earned, P = Principal, r = Annual rate (decimal), t = Time in years.
Compound Interest: A = P(1 + r/n)^(nt)
Where: A = Future value, P = Principal, r = Annual rate (decimal), n = Compounds per year, t = Time in years.
Continuous Compounding: A = Pe^(rt)
This represents the theoretical maximum interest when compounding occurs infinitely often.