Interest Calculator
Calculate your simple or compound interest easily and understand how your money grows over time.
What Is an Interest Calculator?
An interest calculator helps you determine how much money you will earn or owe based on your principal amount, interest rate, and time period. Whether you are saving, investing, or borrowing, understanding interest is crucial for financial planning.
Types of Interest: Simple vs Compound
There are two main types of interest: simple interest and compound interest. Simple interest is calculated only on the principal amount, while compound interest adds interest on both the principal and previously earned interest. This means compound interest grows faster over time.
Formula for Simple Interest
Simple Interest = (Principal × Rate × Time) / 100 For example, if you invest $1,000 at 5% for 3 years: (1000 × 5 × 3) / 100 = $150 of interest.
Formula for Compound Interest
Compound Interest = Principal × (1 + Rate/100)Time − Principal Using the same numbers: 1000 × (1 + 0.05)3 − 1000 = $157.63 Compound interest earns you more because it adds growth on top of growth.
Why Use an Interest Calculator?
An interest calculator saves time, reduces mistakes, and provides instant results. You can compare different interest rates, investment durations, and compounding periods. Whether planning a savings goal or estimating a loan’s cost, this calculator helps make informed financial decisions.
Tips for Using the Interest Calculator
- Use realistic interest rates for better accuracy.
- For long-term investments, compound interest is more powerful.
- Always check if your bank uses simple or compound interest.
Additional Financial Tools
You can also explore our Loan Calculator or the Savings Calculator to plan your finances effectively.
External Resources
For more financial education, visit the U.S. Investor Education Portal or Investopedia for detailed guides.