Interest Calculator

Interest is the reward a lender receives for allowing someone else to use their money. Whether you’re borrowing or saving, interest plays a central role in personal and business finances. Our Interest Calculator helps you understand how your money grows or what you’ll owe over time — depending on whether you’re saving or borrowing.

Two Key Types of Interest: Simple and Compound

Simple Interest Made Easy

Simple interest is calculated only on the original amount (the principal). Suppose Emma borrows $100 for a year at an annual interest rate of 10%. The interest is:

$100 × 10% = $10

At the end of the year, Emma repays:

$100 (principal) + $10 (interest) = $110

For a two-year loan, simple interest just doubles:

$10 × 2 years = $20 total interest

So, the repayment becomes $120 after two years.

Formula:

If interest is calculated more frequently (monthly, quarterly), adjust the time accordingly. But keep in mind: simple interest is rare in modern finance — most loans and savings use compound interest.

Compound Interest: Growth on Growth

Compound interest adds a twist: each period, interest is calculated on both the original amount and any previously earned interest.

Let’s say Emma again borrows $100 at 10% interest for 2 years, but this time the interest is compounded annually:

• Year 1: $100 × 10% = $10 → Total = $110

• Year 2: $110 × 10% = $11 → Total = $121

Compound interest results in $1 more than simple interest over two years — because interest is earning interest.

The more frequently interest compounds (monthly, daily), the faster the growth.

Smart Tools for Smart Users

Rule of 72: Quick Mental Estimate

Want to estimate how long it takes to double your investment? Divide 72 by your annual interest rate.

Example:
At an 8% return:
72 ÷ 8 = 9 years to double your money

This trick works best for rates between 6% and 10%.

Fixed and Variable Interest Rates

Interest rates can be either fixed (stay the same) or variable/floating (change with the market). Variable rates usually follow benchmarks like the Federal Reserve rate or LIBOR.

Our calculator uses fixed rates only — meaning the rate won’t change over time.

Regular Contributions: Build Wealth Consistently

Saving monthly? Our calculator supports scheduled contributions, whether made at the beginning or end of each period. Starting earlier gives your money more time to grow — one extra compounding period per deposit!

Taxes and Your Interest Earnings

Interest earned on savings, bonds, or CDs might be taxed. For example:

• U.S. Treasury bond interest: Taxed federally, exempt at the state/local level

• Corporate bond interest: Typically taxed fully

Example with taxes:

• $100 invested at 6% for 20 years grows to $320.71 (no tax)

• But with a 25% tax on interest, the result shrinks to $239.78

That’s why it’s crucial to factor in your tax rate when planning long-term savings.

The Hidden Cost: Inflation

Inflation erodes your money’s purchasing power. If the inflation rate is 3% and your savings grow at 6%, your real return is only around 3%.

Over the past century, inflation in the U.S. has averaged about 3% per year. Meanwhile, the stock market has averaged around 10% — making investing a better choice for long-term wealth building.

You can adjust for inflation in our calculator by entering your expected inflation rate to get real growth estimates.

The Bottom Line

Between compound growth, tax impact, and inflation, growing your money takes more than just saving — it takes smart planning.

Use our Interest Calculator to:

• Estimate returns on savings

• Understand loan repayment costs

• Plan periodic contributions

• Adjust for tax and inflation

Whether you’re saving for a dream vacation or repaying a loan, our tool helps you make informed financial decisions.