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Compound interest calculator

Compound interest calculator online in 2022: assessment of the best compound interest in the USA online

The best compound interest calculator
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Interest rate

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What Is a Compound Interest?

Compound interest is when an initial balance of a loan grows over time. It is generally called "interest on interest," as the accumulated interest gets reinvested or compounded along with a principal amount. Compounded interest is the accumulated interest of both the initial balance and the interest earned on already accrued returns.

This concept suggests that the interest rate is added to the principal amount, and the following compound interest calculations are carried on the total of the original principal amount and the accrued interest.

In the case of saving and investing, compound interest means the wealth is growing by means of the earned investment returns to the initial balance and reinvestments of the returns after. Yet, in the case of the debt, this interest works against the borrower. The loan amount increases as the interest is growing on the initial amount and accrued interest.

To comprehend the concept, there is an example: you open an investment account with an initial sum of $5,000. The period is 10 years, and the interest rate is 10%. Using a compound interest calculator, you can assess that your end balance after 5 years will be $8,052.55, and after 10 years, you will have $12,968.71 in your savings account. This shows the gains. However, if you regard it as a loan, you will get to know how much you will actually lose.

Simple Interest vs. Compound Interest

Simple interest is the interest gained on the principal amount. Here, the interest doesn't get reinvested. If you invest $1,000 on the interest rate of 10% per year, then the interest amount will be $100 per year. At the end of the year, if you want to draw the investments, you will get $1,100. After five years, you will have $1,500.

Similarly, if you get a loan of $5,000 under a 5% interest rate compounded monthly for two years of the loan term, you will have to pay $264.57 of interest in total, excluding fees, penalties, and taxes.

Compound interest puts the interest earned back into the investments to earn on the accrued sum. So, instead of earning $100 on the investment account of $1,000, with the accrued interest, you will be earning $1,100 the following year. So, after five years, the investments you can draw from your investment account will be $1,610.51.

The difference between $1,500 and $1,610.51 may seem insignificant. However, if you invest more and for longer, the gap will be pretty sensible.

The same is with the loans. You will have to pay more interest with compound interest in contrast to simple interest loans. The most common compound interest loans are student loans, personal loans, and mortgages. You want to have a shorter loan term with them and a lower interest rate.

Why You Need a Compound Interest Calculator

Compound interest is more complex to assess than simple interest. The loan taken with compound interest will be growing quite fast, and managing the sum you need to pay back is essential. While with savings accounts, you better allow the compound interest to accumulate, with the loan, you need to deal with the rate quickly.

You will need to plan your expenses according to the repayment schedule. If calculating simple interest cannot be that difficult to conduct, compound interest is complicated to assume rightly. There are compound interest formulas to make calculations manually. However, it can be worth trying a compound interest calculator.

It is a tool that applies compound interest formulas automatically and shows all the data you need to know to make the payments towards your loan successfully.

How to Calculate Compound Interest

Calculating Manually

You can calculate compound interest manually. Using the compound interest formula, you can figure out the interest compounds. The things you need to know are the principal amount, interest rate, compounding periods, and the investment or loan duration.

The compound interest formula where you can find the end balance you get is:

A = P (1 + r/n)^(nt), where

The formula allowing you to assess the total interest is:

CI = P((1+r/n)^(nt)-1), where

If you make additional contributions to your savings account, you can calculate the end balance with the formula:

A = P(1+r/n)^(nt)+c[((1+r/n)^(nt)-1)/(r/n)], where

Calculating Compound Interest Using Calculator

As you might understand, calculating compound interest manually may be pretty extensive in time, and there is always room for mistakes. A compound interest calculator makes the process easier and quicker.

To get the assessment on your compound interest using the calculator, you need to:

  1. Enter the loan amount. You will need to fill in your loan amount in USD.

  2. Set the loan term. This is how long your loan lasts.

  3. Fill in the interest rate you took the loan for.

  4. Choose the type of payment. Annuity payment means the exact amounts will be contributed towards the loan throughout the entire term. A differentiated repayment schedule implies that the amount of the monthly payment gets reduced.

  5. Specify the date of your payment.

After you hit the 'Calculate' button, the tool with applying the compound interest formula to your numbers. You will see a table showing all the criteria. You can assess the following:

You will additionally get the payment dates. You can then share it on your social media page so as not to forget to make on time payments.

When Does Compound Interest Apply to a Loan?

Loans issuing compound interest are not as widespread as loans with simple interest. However, there are lenders offering loans with compound interest. The most general types are student loans, personal loans, and mortgages.

Student Loans

Both private and federal student loans use simple interest as a widespread practice. However, there are instances of consolidation and forbearance when the loan interest capitalizes on the principal. Capitalization increases the amount of the loan principal, which affects the daily interest and the cost of a loan. Capitalization typically happens in situations of non-payment, such as grace period or deferment. It can be avoided by paying the interest of the loan monthly.

Personal Loans

Personal loans use compound interest when the borrower doesn't meet the schedule of repayments. If you pay the loan on time or early, the lender uses simple interest.

If your personal loan is issued with compound interest and you miss the payment, the interest gets added to the principal amount. The following interest calculations will be conducted on the accrued interest. A typical example of compound interest on a personal loan is a credit card.


In the case of a mortgage, the compound interest gets added to the principal of a loan. The more frequently the compounded interest is issued on your mortgage, the more your loan will grow.

Some borrowers make plans to repay the mortgage early to reduce the total interest amount. It can be wise to pay bi-weekly to add one monthly payment to the mortgage, which will be issued towards the interest.

How to Compare Lenders Using Compound Interest Calculator

When looking for a lender, you can evaluate the options without visiting the offices. You can use the calculator before even pre-applying using only the information provided on the lenders' websites.


How do I assume compound interest with a calculator?

To assume compound interest, you need to know the principal amount, interest rate, compounding periods, and the investment or loan duration. To get the data, fill in the information on your loan into the appropriate fields.

What is a compound interest formula?

The compound interest formula where you can find the end balance of your savings account or a loan you get is:

A = P (1 + r/n)^(nt), where

  • A is the end balance,

  • P is the principal amount,

  • r is the interest rate,

  • n is the number of times the compounding periods, and

  • t is the number of compounding periods.

What is $10,000 with 5% and 10% interest rates in 20 years?

For an annual rate of return of 5%, the future value of your savings is $26,532.98. For an annual rate of return of 10%, the future value of your savings is $67,275.00.

What is the simplest way to calculate compound interest?

In accordance with the offered interest rates, initial balance, and compound period, you can assess the compound interest with a calculator. It is the simplest way.