Interest Calculator: Simple and Compound Interest Explained

Understanding interest calculations is essential for making smart financial decisions — whether you are saving money, investing, or taking out a loan.

Simple Interest vs Compound Interest

Simple Interest

Interest is calculated only on the original principal amount.

Simple Interest = Principal × Rate × Time
Total = Principal + (Principal × Rate × Time)

Example: $10,000 at 5% for 3 years

Interest = $10,000 × 0.05 × 3 = $1,500

Total = $11,500

Compound Interest

Interest is calculated on the principal plus all previously accumulated interest.

Total = Principal × (1 + Rate/n)^(n×Time)

Where n = compounding frequency per year. Example: $10,000 at 5% for 3 years, compounded annually

Total = $10,000 × (1.05)³ = $11,576.25

Interest = $1,576.25

Compounding Frequency Comparison

$10,000 at 5% annual interest for 10 years:

Frequency	Times/Year	Final Amount	Interest Earned
Annually	1	$16,288.95	$6,288.95
Semi-annually	2	$16,386.16	$6,386.16
Quarterly	4	$16,436.19	$6,436.19
Monthly	12	$16,470.09	$6,470.09
Daily	365	$16,486.65	$6,486.65

The Rule of 72

A quick way to estimate how long it takes to double your money:

Years to double ≈ 72 / Interest Rate

At 6% interest, your money doubles in approximately 12 years.

Practical Applications

Savings accounts: How much your deposits will grow

Loans: Total cost of borrowing over time

Investments: Long-term growth projections

Credit cards: Understanding revolving balance costs

Try It Yourself

Calculate simple and compound interest with our free Interest Calculator. Compare different rates, terms, and compounding frequencies instantly.