Interest Calculator
Calculate simple or compound interest earned or owed on any principal amount.
Interest Calculator
Calculate your interest instantly.
Total Interest
$0What Interest Actually Is
Interest is the price of time. Lend money and you give up the use of it — interest is what you're paid for the wait. Borrow, and it's what you pay for having the money now instead of later.
That single idea sits behind every savings account, every loan, and every bond. The mechanics differ — how often it's calculated, whether it accrues on the original sum or on a growing balance — but the principle doesn't change. This calculator handles both common methods so you can see what a rate genuinely costs or earns before committing to anything.
Two Methods, Very Different Results
Simple Interest
Calculated only on the original principal. The amount each period is identical, so the total grows in a straight line. Uncommon in modern consumer finance, but still found in short-term lending and some fixed instruments.
Compound Interest
Calculated on the principal plus everything already accumulated. Each period starts from a larger base, so growth accelerates. This is the default almost everywhere — savings, loans, cards, investments.
Over a single year the difference is barely visible. Over twenty it separates a decent return from a transformative one — or a manageable debt from an unmanageable one.
The Formulas
Simple Interest
I = P × r × t
I = Interest · P = Principal · r = Annual Rate (as a decimal) · t = Time in Years
Compound Interest
A = P × (1 + r/n)nt
A = Final Amount · P = Principal · r = Annual Rate · n = Compounds per Year · t = Years
The compound formula collapses into the simple one when the term is a single period. Everything after that first period is where the two diverge.
Seeing the Gap
$10,000 at 7%, calculated both ways:
| Years | Simple | Compound (annual) | Difference |
|---|---|---|---|
| 1 | $10,700 | $10,700 | $0 |
| 5 | $13,500 | $14,026 | $526 |
| 10 | $17,000 | $19,672 | $2,672 |
| 20 | $24,000 | $38,697 | $14,697 |
| 30 | $31,000 | $76,123 | $45,123 |
Identical principal, identical rate. The only variable is whether interest earns interest — and after thirty years that alone accounts for $45,123.
APR and APY Are Not the Same Number
Both are quoted as annual percentages, which is exactly why they get confused. The difference matters whenever you're comparing offers.
| APR | APY | |
|---|---|---|
| Stands for | Annual Percentage Rate | Annual Percentage Yield |
| Used for | Borrowing | Saving and investing |
| Includes fees | Yes | No |
| Reflects compounding | No | Yes |
A 12% APR compounded monthly works out to roughly 12.68% APY. Lenders quote the lower figure and savings providers quote the higher one — both entirely legally, because each describes something different. When comparing loans, insist on APR. When comparing deposits, insist on APY.
How Often Interest Is Calculated
Compounding frequency is the quiet variable in most agreements. Two products can quote an identical rate while producing different outcomes, purely because one calculates more often than the other.
$10,000 at 8% for one year:
| Frequency | Periods per year | Balance after 1 year | Effective rate |
|---|---|---|---|
| Annually | 1 | $10,800.00 | 8.000% |
| Quarterly | 4 | $10,824.32 | 8.243% |
| Monthly | 12 | $10,830.00 | 8.300% |
| Daily | 365 | $10,832.78 | 8.328% |
Frequent compounding helps you on savings and hurts you on debt. Credit cards typically compound daily, which is one reason balances grow faster than the headline rate suggests.
Where You'll Encounter Each Type
- Savings and deposit accounts — compound, usually daily or monthly, credited monthly.
- Mortgages and personal loans — compound monthly, repaid through fixed amortised instalments.
- Credit cards — compound daily on the average balance, which is why carrying a balance escalates quickly.
- Short-term and bridging loans — often simple interest, with the full amount settled at maturity.
- Zero-coupon bonds — no periodic payment at all; the return is the gap between discounted purchase price and face value.
What Determines the Rate You Get
Rates aren't arbitrary. On borrowing they price risk; on savings they price the institution's need for deposits.
- Central bank policy — the base rate everything else is built on top of.
- Credit profile — on loans, the strongest personal factor. A weak file can add several percentage points.
- Security — collateral lowers the lender's exposure, which is why mortgage rates sit well below card rates.
- Term length — longer commitments generally carry higher rates to compensate for uncertainty.
- Inflation expectations — lenders price in the erosion of purchasing power over the life of the agreement.
Frequently Asked Questions
Use compound interest unless the agreement explicitly states otherwise — it's the default for savings accounts, mortgages, personal loans, and cards. Reserve simple interest for short-term arrangements where the terms confirm it, or for a quick rough estimate.
APR applies to borrowing and includes mandatory fees but ignores compounding. APY applies to savings and reflects compounding but excludes fees. The same underlying rate produces a lower APR figure and a higher APY figure, so never compare one against the other directly.
Less than most people expect over a single year, more than most expect over decades. On $10,000 at 8%, daily compounding beats annual by about $33 in year one — but sustained over thirty years that gap widens into thousands.
Usually one of three reasons: the headline rate was promotional and has expired, the rate applies only above a minimum balance, or tax has been deducted from the interest credited. Check which applies before switching providers.
Interest for the period is calculated first and deducted from your payment; only the remainder reduces the balance. This is why early payments on a long loan barely move the principal, and why paying more than the required amount has a disproportionate effect.
They have been, in a handful of economies where central banks pushed policy rates below zero and depositors effectively paid to hold money. It remains unusual, and consumer accounts were largely shielded even where it occurred.
No. Interest earned on savings is taxable income in most jurisdictions, so your actual return will be lower than shown. Treatment varies considerably by country and account type — check the rules that apply to you.
Mathematically exact for the inputs given. Real-world results differ where fees apply, rates change mid-term, or the provider uses a different day-count convention. Use it to compare scenarios rather than to predict an exact final balance.