What is an interest calculator?
An interest calculator is an online tool that calculates how much interest money can earn or how much interest may be charged on a loan. It can be used for simple interest or compound interest calculations.
Interest Calculator
Compare simple and compound interest for a lump sum across a chosen rate and time period.
Enter your interest details
Select the interest method and provide the principal, annual rate, and time period.
About this calculator
How to use Interest Calculator, plus the formulas and logic behind the results.
Tool description
The Interest Calculator compares simple and compound interest on a principal over a chosen rate, time, and compounding frequency.
How to use
- Enter the principal, annual rate, and time period.
- Choose simple or compound interest.
- For compound interest, select the compounding frequency.
- Select Calculate to see ending balance, interest, and effective annual rate.
Formulas & reference
Simple interest: I = P × r × tCompound: A = P(1 + r/n)^(nt)EAR = (1 + r/n)^n − 1
Simple vs. compound interest
- Simple interest uses original principal
- Compound interest includes prior interest
- Frequency changes effective yield
- Rates may represent cost or return
Calculation logic
Simple mode applies interest only to the original principal. Compound mode reinvests interest each period according to the selected frequency and reports the effective annual rate.
The result excludes taxes, account fees, loan fees, and any changes in the stated rate.
Interest Calculator FAQ
Common questions about the calculation and how to interpret the estimate.
How do you calculate interest?
The calculation depends on the type of interest. Simple interest can be calculated using Interest = Principal × Rate × Time, while compound interest also considers how frequently interest is added to the balance.
What is simple interest?
Simple interest is calculated only on the original principal. The basic formula is I = P × r × t, where P is the principal, r is the interest rate, and t is the time period.
What is compound interest?
Compound interest is calculated on the original principal plus previously accumulated interest. This allows interest to earn additional interest over time.
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal, while compound interest is calculated on the principal and accumulated interest. Compound interest can therefore produce greater growth over longer periods.
How does the interest rate affect the amount of interest?
A higher interest rate generally produces more interest on savings or investments and increases the cost of borrowing on loans. The effect also depends on the principal and time period.
How does time affect interest calculations?
The longer money remains invested or borrowed, the more interest can accumulate. With compound interest, the effect of time can become especially significant because previously earned interest can also generate interest.
How often can interest be compounded?
Interest may be compounded annually, semi-annually, quarterly, monthly, daily, or according to another schedule. The compounding frequency affects the effective return.
What is an annual percentage rate?
APR, or annual percentage rate, is a measure of the annual cost of borrowing and may include certain fees. It is commonly used when comparing loans and credit products.
What is an annual percentage yield?
APY, or annual percentage yield, reflects the annual return on a deposit or investment while taking compound interest into account. It can be higher than the stated interest rate when interest compounds more than once per year.
Can an interest calculator calculate loan interest?
Yes. An interest calculator can estimate the interest charged on a loan based on the principal, interest rate, and repayment period. For installment loans, a dedicated loan calculator may provide more detailed payment information.
Can an interest calculator calculate savings interest?
Yes. You can use an interest calculator to estimate interest earned on savings based on the starting balance, interest rate, compounding frequency, and time period.