Interest Calculator
Calculate simple and compound interest, plus the total maturity value, from a principal, rate, and time. Useful for gauging savings or loan interest.
Simple: P×r×t. Compound: P×(1+r/n)^(n×t). Pre-tax estimate.
How simple and compound interest are calculated
Simple interest is charged only on the original principal, so it grows in a straight line: interest = P x r x t, where P is the principal, r is the annual rate as a decimal, and t is the number of years. Compound interest is different because each period's interest is added back to the balance and then earns interest itself. The maturity value is P x (1 + r/n)^(n x t), where n is how many times per year interest is compounded (1 for annual, 4 for quarterly, 12 for monthly, 365 for daily). The interest earned is simply that maturity value minus P. The two formulas give the same answer only when t is very short; the longer the money sits, the more compound interest pulls ahead.
A worked comparison over the same 3 years
- Simple interest: 10,000 at 8% for 3 years earns 10,000 x 0.08 x 3 = 2,400, for a total of 12,400.
- Compound annually: 10,000 x 1.08^3 = 12,597.12, so interest is 2,597.12 (about 197 more than simple).
- Compound quarterly: 12,682.42. Compound monthly: 12,702.37. Compound daily: about 12,712.
- The whole spread from annual to daily compounding is only about 115 over these 3 years, while switching from simple to compound already added ~197. Time and rate move the result far more than frequency does.
Why time matters more than compounding frequency
People often chase accounts that compound daily instead of monthly, but that choice is worth very little compared with how long the money compounds. Take the same 10,000 at 8% compounded annually: after 10 years it is 21,589, after 20 years 46,610, and after 30 years about 100,627 - roughly ten times the original. By contrast, 30 years of simple interest at the same rate only reaches 34,000. A quick sanity check is the Rule of 72: divide 72 by the rate to estimate the doubling time. At 8% that is 72 / 8 = 9 years, and indeed 10,000 x 1.08^9 is 19,990, almost exactly double. The takeaway is that starting earlier and leaving money invested longer beats hunting for a marginally better compounding schedule.
When this calculator helps
- Comparing two savings or deposit offers: enter the same principal and term for each, match the compounding frequency to each product, and see which maturity value actually wins.
- Estimating progress toward a goal: put in a lump sum, a realistic rate, and the years until you need the money to get a rough finish line before tax.
- Sizing up a loan's interest cost: for a fixed-rate, interest-only or single-repayment loan the compound formula shows how much interest accrues, which helps you judge whether an offer is reasonable.
- Running what-if scenarios: change only the rate, only the term, or only the frequency one at a time to see which lever moves the result most.
APR, APY, and the rate you actually enter
- APR (nominal annual rate) is the headline rate before compounding is applied. APY (or effective annual rate) already bakes compounding in, which is why it is slightly higher.
- Example: 8% nominal compounded monthly works out to an effective 8.30% per year; compounded quarterly it is about 8.24%. Same headline number, different real yield.
- Enter the annual rate and let the frequency field do the compounding - do not divide the rate by 12 yourself and also set n to 12, or you will compound twice.
- When comparing products, compare APY to APY. Two accounts advertising the same APR can pay differently once their compounding frequencies differ.
Common mistakes and what this estimate leaves out
- Mixing up the rate period: a 0.65% monthly figure is not the same as 0.65% per year. Convert to an annual rate before entering it.
- Assuming every loan compounds like a deposit. Most mortgages and installment loans are amortizing, so the balance falls as you repay and the interest each month is calculated on the remaining balance - this tool models a single unpaid balance, not a repayment schedule.
- Treating the result as an after-tax number. Interest income is often taxable, so your take-home return can be noticeably lower.
- Ignoring real-world terms: promotional teaser rates, minimum balances, fees, and early-withdrawal penalties can all change the final figure your bank actually pays.
- For anything where money truly matters, confirm the exact terms, compounding method, and tax treatment with the provider before deciding.
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What is the difference between APR and APY?
APR is the nominal annual rate before compounding, while APY (the effective annual rate) includes the effect of compounding, so it is a little higher. For example, an 8% nominal rate compounded monthly gives an APY of 8.30%. When comparing savings products, compare APY to APY so the compounding frequency is already accounted for.
How long will it take to double my money?
A fast estimate is the Rule of 72: divide 72 by the annual rate. At 8% that is 72 / 8 = about 9 years, and the exact math agrees closely (10,000 grows to 19,990 after 9 years). The rule is an approximation that works best for rates in roughly the 4% to 12% range.
Does daily compounding really beat monthly by much?
Usually not by much. On 10,000 at 8% for 3 years, monthly compounding gives 12,702 and daily gives about 12,712 - a difference of only around 10. The rate and the length of time you stay invested matter far more than how often interest is added.
Should I enter my rate as a monthly or an annual number?
Enter the annual rate and use the compounding frequency setting to tell the calculator how often interest is added. If you divide the rate by 12 yourself and also set the frequency to monthly, you will compound twice and get an inflated result. When in doubt, use the annual (APR) figure the bank advertises.
Why is my bank's actual interest lower than this estimate?
This is a pre-tax figure based on a single, undisturbed balance. In practice, interest income is often taxed, and products may carry fees, minimum-balance rules, promotional rates that expire, or a different compounding method. Those factors typically pull the real payout below the clean estimate, so confirm exact numbers with your provider.
Can I use this to work out a loan's interest?
Yes for a simple case, such as a fixed-rate loan repaid in one lump sum, where the compound formula shows how much interest builds up. It does not model an amortizing loan like a mortgage or car loan, where each payment reduces the balance and the interest is recalculated on what remains. For those, use a dedicated loan or amortization calculator.