Interest Calculator
Free Interest Calculator for financial. Enter your values to compare options, see amortization, and plan smarter. Free, formula-verified, no signup needed.
Formula
Simple: I = P×r×t | Compound: A = P(1+r)^t
Simple interest calculates on original principal only. Compound interest calculates on principal plus accumulated interest, growing exponentially.
Worked Examples
Example 1: Simple vs Compound Comparison
Problem:$10,000 invested at 8% for 10 years. Compare simple vs compound interest.
Solution:Simple Interest:\nInterest = $10,000 × 8% × 10 = $8,000\nFinal = $18,000\n\nCompound Interest (annual):\nFinal = $10,000 × (1.08)^10 = $21,589\nInterest = $11,589\n\nDifference: $3,589 more with compound!\n\nCompound grows faster because Year 2 earns interest on Year 1's interest, and so on.
Result:Compound earns $3,589 more (45% more interest)
Example 2: Rule of 72 in Action
Problem:How long to double $5,000 at various rates?
Solution:Using Rule of 72:\n\nAt 4%: 72 ÷ 4 = 18 years\nAt 6%: 72 ÷ 6 = 12 years\nAt 8%: 72 ÷ 8 = 9 years\nAt 10%: 72 ÷ 10 = 7.2 years\nAt 12%: 72 ÷ 12 = 6 years\n\nActual at 8%:\n$5,000 × 1.08^9 = $9,995 (≈ double)\n\nRule of 72 is remarkably accurate!
Result:At 8%, doubles in ~9 years
Example 3: Compounding Frequency Impact
Problem:$25,000 at 6% for 5 years. Compare annual vs monthly compounding.
Solution:Annual compounding:\n$25,000 × (1.06)^5 = $33,456\n\nMonthly compounding:\nMonthly rate: 6% ÷ 12 = 0.5%\nPeriods: 5 × 12 = 60\n$25,000 × (1.005)^60 = $33,674\n\nDifference: $218\n\nOver longer periods, the difference grows substantially. Always check compounding frequency.
Result:Monthly earns $218 more
Frequently Asked Questions
What's the difference between simple and compound interest?
Simple interest: calculated only on the original principal. Compound interest: calculated on principal PLUS accumulated interest. Over time, compound interest grows much faster because you earn 'interest on interest.'
Which interest type is used for loans?
Most loans use compound interest: mortgages (monthly), credit cards (daily), student loans. Some simple interest loans exist: certain auto loans, short-term personal loans. Savings accounts use compound interest (to your benefit).
How do I calculate simple interest?
Formula: Interest = Principal × Rate × Time. $10,000 at 5% for 3 years: $10,000 × 0.05 × 3 = $1,500 total interest. The amount stays constant each year ($500/year).
How do I calculate compound interest?
Formula: Final = Principal × (1 + rate)^years. $10,000 at 5% for 3 years: $10,000 × 1.05^3 = $11,576. Interest earned: $1,576 (vs $1,500 simple). The gap widens over time.