Compound Interest Calculator
Our compound interest calculator is designed to help you figure out exactly how much compound interest you’ll pay on a loan – or how much you’ll get from an investment.
Compound Interest Calculator
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By using this calculator you agree to terms and conditions. These calculators are designed to be informational and educational tools only, and when used alone, do not constitute investment or financial advice. We strongly recommend that you seek the advice of a financial services professional before making any type of investment or deciding on your financial matters. This model is provided as a rough approximation of future financial performance. The results presented by this calculator are hypothetical and may not reflect the actual growth of your own investments. We can't take into account potential lender fees, payoff schedule can be longer than in the estimation. Financialfreedom and its affiliates are not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. Financialfreedom is not responsible for any human or mechanical errors or omissions.
What Is Compound Interest?
Compound interest is a type of interest calculated based on the combination of the principal (the original amount of the loan or investment) combined with any previously accumulated interest. Credit cards and many loans use compound interest, as do some investments.
How This Compound Interest Calculator Works
This calculator is programmed to calculate interest compounded on a daily, weekly, monthly, or even an annual basis depending on the information you enter. There are two ways you can use it: to determine the compounded amount of a loan or to determine how much you need to invest to receive a specific return.
Compound Interest Calculator Definitions
There are some basic financial terms you must understand to use this calculator properly:
Starting Principal. Your starting principal is the original dollar amount of the loan or investment as stated in your contract.
Interest Rate. The interest rate you will pay on the principal of your loan or receive on your investment, as stated in your contract. This is usually expressed as an APR (Annual Percentage Rate).
Number of Days. The number of days your loan or investment is for.
Compounding Period. How frequently your interest will be compounded.
Effective Interest Rate. This is the total interest rate, accounting for the increased principal as it is compounded.
Compounded Rate of Return. The compounded rate of return is the amount of money earned in interest, based on the effective interest rate. If you’re calculating a loan, this money will be earned by the lender. If you’re calculating an investment, this is the money you will earn.
Compounded Amount. This is the final total of your loan or investment, accounting for compounded interest.
Calculating the Compounded Amount of Your Loan
The compounded amount of your loan is the total amount your loan will cost when all of the predicted interest is added, accounting for the specified compounding rate.
To calculate the compounded total of a loan, complete the following steps:
- Choose to calculate the compounded total.
- Enter the principal of your loan – This is the amount you’re actually borrowing.
- Type in the interest rate offered on the loan you’re applying for.
- Add the total number of days you expect to take to pay off the loan.
- Choose the compounding rate.
- Double check all your numbers and, if they’re correct, submit them for calculation.
Our calculator will crunch the numbers and tell you the compounded total of your loan. You can then save this number as a .PDF file and start over to compare multiple loans.
Calculating the Ideal Opening Balance
The other way you can use this calculator is to determine exactly how much you need to invest to hit a certain goal.
You can calculate your ideal opening balance by following the steps listed below:
- Select “Calculate Opening Amount.”
- Choose whether you want to base your calculations on a 360 day year or a 365 day year.
- In the “Principal” box, type in the compounded total you would like to achieve by the end of your investment period.
- Enter the amount of time you wish to keep the money invested in days.
- Choose how frequently the calculator should compound the interest.
- Revisit your numbers and, if everything checks out, submit them for calculation.
The calculator will then create a full report, using all of your numbers to calculate the ideal opening balance for an investment. This report can be saved as a .PDF, allowing you to experiment with different numbers until you find the perfect solution for you.