Interest Calculator
Calculate simple and compound interest with our free Interest Calculator. See how your savings or investments grow over time with different interest rates, compounding frequencies, and regular contributions. Compare the power of compound interest against simple interest.
What Is Interest?
Interest is the cost of borrowing money or the return on invested funds. When you deposit money in a savings account or invest in an asset, you earn interest as compensation for letting someone else use your money. When you borrow money, you pay interest to the lender.
There are two main types of interest:
- Simple Interest: Calculated only on the principal amount — the
original sum of money deposited or borrowed. Formula:
I = P × r × t - Compound Interest: Calculated on both the principal and the
accumulated interest from previous periods. This is "interest on interest" and
causes exponential growth. Formula:
A = P × (1 + r/n)nt
How Does the Interest Calculator Work?
This calculator supports three modes:
Compound Interest: Uses the formula A = P × (1 + r/n)nt
plus optional regular contributions. The calculator shows your final balance, total interest
earned, and the Effective Annual Rate (EAR).
Simple Interest: Uses the formula
A = P × (1 + r × t). Interest is calculated only on the principal.
Compare: Shows how two different interest rates or compounding frequencies affect your investment growth side by side.
Advanced options allow you to account for inflation (to see your balance in today's purchasing power) and taxes (to see your after-tax return).
Why Use This Interest Calculator?
- Three Modes: Simple interest, compound interest, and side-by-side comparison.
- Regular Contributions: Add recurring deposits to see how consistent saving boosts growth.
- Inflation & Tax Adjustments: Get a more realistic picture of your net returns.
- Visual Growth Chart: See how your balance grows over time.
- Free & Private: No registration, no data storage.
Simple vs Compound Interest Comparison
- Simple Interest: Linear growth — interest is earned only on the original principal. Best for short-term loans or investments.
- Compound Interest: Exponential growth — interest is earned on both principal and accumulated interest. The more frequently interest is compounded, the faster your money grows.
- Key Difference: Over a 10-year period at 5%, $10,000 grows to $15,000 with simple interest but to $16,470 with annual compounding — a difference of $1,470.
❓ Interest Calculator FAQ
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal amount. Compound interest is calculated on both the principal and the accumulated interest from previous periods. Compound interest grows faster because you earn "interest on interest."
What is the formula for simple interest?
Simple interest: I = P × r × t, where I is the interest, P is the principal, r is the annual interest rate (as a decimal), and t is the time in years. The total amount is A = P × (1 + r × t).
What is the formula for compound interest?
Compound interest: A = P × (1 + r/n)nt, where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years.
What is compounding frequency?
Compounding frequency is how often interest is calculated and added to your balance. Common frequencies include annually (1), semi-annually (2), quarterly (4), monthly (12), and daily (365). More frequent compounding results in more interest earned.
What is the Effective Annual Rate (EAR)?
The Effective Annual Rate (EAR) is the actual annual rate of return accounting for compounding. It shows the true cost of borrowing or the true return on investment. EAR is always higher than the nominal rate when compounding occurs more than annually.
How does inflation affect my interest earnings?
Inflation reduces the purchasing power of your money. If you earn 5% interest but inflation is 3%, your real return is only 2%. The calculator can adjust your final balance for inflation to show its value in today's dollars.
How are interest earnings taxed?
Interest earned on savings and investments is typically subject to income tax. The calculator can adjust your final balance for taxes, showing your after-tax return. The tax rate you enter depends on your tax bracket and the type of account.
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the nominal rate without considering compounding. APY (Annual Percentage Yield) includes the effect of compounding and is equivalent to the Effective Annual Rate (EAR). APY is always higher than APR when compounding occurs.
How do regular contributions affect compound interest?
Regular contributions dramatically increase the final balance because each contribution also earns compound interest over time. For example, $10,000 at 5% for 10 years grows to $16,470. Adding $100 monthly grows to $31,113 — nearly double.
What is the Rule of 72?
The Rule of 72 is a quick way to estimate how long it takes for an investment to double. Divide 72 by the interest rate. For example, at 6% interest, 72 ÷ 6 = 12 years to double your money. At 8%, it takes 9 years.
What is a good interest rate for savings?
As of 2025, good savings account rates range from 4-5% APY. High-yield savings accounts offer competitive rates, while traditional savings accounts often offer lower rates. The rate you can earn depends on the current economic environment and the type of account.
What is the difference between fixed and variable interest rates?
A fixed interest rate stays the same for the entire term. A variable rate can change over time based on market conditions. Fixed rates offer predictability, while variable rates may start lower but can increase.
How do I calculate interest on a loan?
To calculate interest on a loan, use the same formulas. For simple interest loans, use I = P × r × t. For amortized loans (like mortgages), interest is calculated on the remaining balance each month. Use our Loan Calculator for more detailed loan calculations.
What is the difference between nominal and real interest rates?
The nominal interest rate is the stated rate before adjusting for inflation. The real interest rate is the nominal rate minus the inflation rate. The real rate reflects the true increase in purchasing power.
How does the calculator handle continuous compounding?
Continuous compounding uses the formula A = P × ert, where e is Euler's number (2.71828). This calculator approximates daily compounding as the highest frequency, which is very close to continuous compounding.
What is the best way to use this calculator for retirement planning?
Enter your current savings as the principal, your expected annual return as the rate, and the number of years until retirement as the time. Add regular monthly contributions to see how consistent saving impacts your retirement balance. Adjust for inflation to see the balance in today's dollars.
How do I use the Compare mode?
In Compare mode, enter your base scenario (principal, rate, time, compounding) and then enter an alternative rate and compounding frequency. The calculator shows the final balance for both scenarios side by side and highlights the difference.
Is this calculator free to use?
Yes, this calculator is completely free to use. No registration or personal data storage is required. All calculations are performed in your browser.