Interest Calculator
Calculate simple interest and compound interest for loans, savings accounts, and investments. Compare different compounding frequencies and see the power of compound interest.
Interest Results
Simple vs Compound
Growth Insights
Annual Growth: $0
Growth Multiple: 0.00x
Rule of 72: Doubles in 0 years
Tip: Compound interest grows wealth exponentially
Understanding Interest Calculations
Interest is the cost of borrowing money or the reward for saving/investing money. There are two main types of interest calculations: simple interest and compound interest.
Simple Interest Formula
Simple interest is calculated as:
I = P × r × t
Where: I = interest, P = principal, r = rate, t = time
Compound Interest Formula
Compound interest grows exponentially:
A = P × (1 + r/n)^(n×t)
Where: A = final amount, P = principal, r = rate, n = compounding frequency, t = time
Key Differences
| Aspect | Simple Interest | Compound Interest |
|---|---|---|
| Calculation | Interest on principal only | Interest on principal + accumulated interest |
| Growth Pattern | Linear growth | Exponential growth |
| Common Use | Short-term loans | Savings accounts, investments |
| Advantage | Simple to calculate | Higher returns over time |
Compounding Frequencies
- Annual: Interest compounded once per year
- Semi-Annual: Interest compounded twice per year
- Quarterly: Interest compounded four times per year
- Monthly: Most common for savings accounts
- Daily: Interest compounded every day
- Continuous: Theoretical limit of compounding
Rule of 72
The Rule of 72 is a quick way to estimate how long it takes for an investment to double at a given interest rate. Simply divide 72 by the annual interest rate.
Years to Double = 72 ÷ Annual Rate
Example: 6% rate ? 72 ÷ 6 = 12 years to double
Applications
- Savings Accounts: Calculate interest earned on deposits
- Loans: Determine total interest paid on borrowed money
- Investments: Project growth of stocks, bonds, and funds
- Certificates of Deposit: Calculate returns on fixed-term deposits
- Retirement Planning: Estimate growth of retirement savings
Tip: Compound interest is often called the "eighth wonder of the world" because of its power to grow wealth. Starting early and making regular contributions can significantly increase your returns through the magic of compounding.