Interest Calculator
Calculate simple and compound interest with support for multiple compounding frequencies. Visualize your investment growth year-by-year with detailed breakdowns. Understand how your money grows over time.
A = P(1+r/n)^(nt)How to Calculate Interest
Whether you're planning an investment, opening a savings account, or understanding a loan, calculating interest is essential. Our calculator makes it simple with support for both simple and compound interest.
- Enter Your Principal: Start with your initial investment or savings amount. This is the amount that will earn interest.
- Provide the Interest Rate: Enter the annual interest rate as a percentage. This is typically the APR (Annual Percentage Rate) from your bank or investment.
- Set Your Time Period: Specify how many years your money will earn interest. Use decimals for partial years if needed.
- Choose Interest Type: Decide between simple interest (rare for modern accounts) or compound interest (standard for savings and investments).
- Select Compounding Frequency: If using compound interest, choose how often interest is added: daily, monthly, quarterly, semi-annually, or annually.
- Calculate: Click the Calculate button to instantly see your final amount, total interest earned, and effective return percentage.
- View Details: Click "Show Breakdown" to see year-by-year growth and track exactly how your investment compounds over time.
Understanding Interest
Simple Interest Formula
I = Prt, where I is interest, P is principal, r is rate (as decimal), and t is time. Simple interest only applies to the original principal, making it less common in modern banking.
Compound Interest Formula
A = P(1+r/n)^(nt), where n is compounding periods per year. Compound interest earns interest on previous interest, making it grow exponentially faster than simple interest.
Compounding Frequency Impact
Annual compounding (1x/year) produces less interest than monthly (12x/year) or daily (365x/year). Continuous compounding is the mathematical limit and produces maximum interest.
Effective Rate
The effective rate shows your actual return as a percentage of your principal. A $10,000 investment earning $1,000 has a 10% effective return, regardless of time period.
Frequently Asked Questions
Why would anyone use simple interest?
Simple interest is rarely used in modern finance but appears in some short-term loans or academic examples. Most real-world savings accounts, bonds, and investments use compound interest because it's more realistic.
What does APR mean?
APR stands for Annual Percentage Rate. It's the yearly interest rate charged or paid on an investment or loan. When you see a 5% savings rate, that's the APR you enter into this calculator.
Is this calculator suitable for loan calculations?
This calculator works for understanding interest on loans, but doesn't account for monthly payments that reduce the balance. Use our Loan Calculator for amortization schedules with regular payments.
Why does daily compounding differ from continuous?
Daily compounding uses a fixed rate (e/365), while continuous compounding uses the mathematical limit with the constant e. The difference is typically less than 1% for annual rates below 20%.
Can I calculate negative interest rates?
Yes, the calculator accepts negative rates. Some government bonds and bank accounts have negative yields. Enter a negative percentage to see how money loses value over time.
What about inflation?
This calculator shows nominal (unadjusted) returns. Your real return is lower after inflation. If your interest rate is 5% but inflation is 3%, your real return is approximately 2%.
How do I calculate reverse: finding the rate needed?
This calculator shows results for a given rate. To find the rate needed for a target amount, you'd need to use the inverse formula or try different rates using this tool.