Interest Calculator
Calculate simple and compound interest on your savings or loans.
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Final Amount
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How to Use This Interest Calculator
Our free interest calculator helps you calculate either simple or compound interest. Enter the principal amount, annual rate, and time period to see how your money grows.
Understanding interest is essential for making informed financial decisions about savings accounts, loans, and investments.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount. Compound interest is calculated on the principal plus accumulated interest, meaning you earn interest on interest.
Which type of interest is better for savings?
Compound interest is generally better for savings because it allows your money to grow faster. For loans, simple interest usually means lower total costs.
How often is compound interest calculated?
Compound interest can be calculated annually, monthly, weekly, or daily. More frequent compounding leads to faster growth of your investment.
Overview
Interest is the cost of borrowing money, or the reward for lending it, and it comes in three common forms: simple interest, compound interest, and continuous compounding. Each one answers a slightly different question. Simple interest is a flat fee on the original principal. Compound interest charges interest on the principal plus whatever interest has already piled up. Continuous compounding is the limit of compound interest as the compounding frequency goes to infinity, used in theoretical finance and some specialist products.
The formulas are short and worth knowing. Simple interest is I = P × r × t, where P is the principal, r is the annual rate as a decimal, and t is time in years. The total amount repaid is A = P × (1 + r × t). Compound interest, with n compounding periods per year, is A = P × (1 + r/n)^(n × t). For a $10,000 deposit at 5 percent for 10 years, simple interest gives $15,000 back. Compounded monthly, the same deposit gives about $16,470. The gap is the compounding at work, and it widens fast as the time horizon stretches.
The choice between simple and compound interest matters on both sides of a loan. A savings account, a CD, or a long-dated bond pays compound interest, which is great for the saver. A short-term personal loan or a car loan often uses simple interest, with a flat fee computed on the original principal. Credit card balances are the worst case: interest compounds daily on the carried balance, which is why a balance that is only paid down slowly can double in just a few years.
Continuous compounding uses the formula A = P × e^(r × t), where e is the mathematical constant about 2.71828. It produces slightly more than daily compounding, but the practical difference is small at typical consumer rates. Run the calculator below across all three modes to see how the rate, the principal, and the time horizon combine. The result is a clearer sense of how a small rate difference or a few extra years of compounding can move the final number by thousands of dollars.
How to use
- Enter the principal, which is the starting amount of the loan, deposit, or investment.
- Enter the annual interest rate as a percentage (for example, 5.5, not 0.055) and the time horizon in years or months.
- Pick a mode: simple interest, compound interest with a chosen frequency (monthly, quarterly, daily), or continuous compounding.
- Read the result: total interest, final amount, and, for compound interest, the effective annual yield to compare products on the same basis.
Formula
Interpreting your results
Total interest is the dollar amount earned or paid. Final amount is principal plus interest. The effective annual yield (APY) is the headline rate turned into the actual yearly return after compounding, which is the right number for comparing two products. A 5.0% nominal rate compounded monthly is about 5.12% APY; compounded daily, about 5.13%. Frequency matters more at higher rates and over longer horizons.