Free Interest Rate Calculator – Calculate Simple & Compound Interest Online
Calculate interest on investments and savings. Compare simple vs compound interest. Multiple compounding frequencies (annual, monthly, daily). See effective annual rate. 100% free.
What Is This Calculator?
This interest rate calculator helps you determine how much your money will grow over time. It supports both simple interest (calculated only on the principal) and compound interest (calculated on principal plus accumulated interest).
How to Use This Tool
Step 1: Enter Principal
Input your initial investment amount.
Step 2: Set Interest Rate
Enter the annual interest rate as a percentage.
Step 3: Choose Time Period
Specify how long you'll invest (in years).
Step 4: Select Compounding
Choose how often interest is calculated:
- Simple — Interest only on original principal
- Annually — Once per year
- Monthly — 12 times per year
- Daily — 365 times per year
Understanding Interest Types
Simple Interest
Formula: A = P(1 + rt)
Interest is calculated only on the original principal amount.
Example:
- $10,000 at 5% for 5 years
- Interest: $10,000 × 0.05 × 5 = $2,500
- Final: $12,500
Compound Interest
Formula: A = P(1 + r/n)^(nt)
Interest is calculated on principal plus previously earned interest.
Example (Annual Compounding):
- $10,000 at 5% for 5 years
- Final: $10,000 × (1 + 0.05)^5 = $12,762.82
- $262.82 more than simple interest!
Compounding Frequency Impact
| Frequency | $10,000 at 5% for 10 years |
|---|---|
| Simple | $15,000.00 |
| Annually | $16,288.95 |
| Monthly | $16,470.09 |
| Daily | $16,486.65 |
Key insight: More frequent compounding = more money earned.
Common Use Cases
Savings Accounts
Compare interest earnings across different banks.
Certificates of Deposit (CDs)
Calculate returns on fixed-term deposits.
Investment Planning
Project long-term investment growth.
Loan Analysis
Understand how much interest you'll pay on loans.
Effective Annual Rate (EAR)
The effective annual rate shows the true annual return accounting for compounding.
Formula: EAR = (1 + r/n)^n - 1
For 5% monthly compounding:
- EAR = (1 + 0.05/12)^12 - 1 = 5.12%
The Power of Compound Interest
Albert Einstein reportedly called compound interest "the eighth wonder of the world." Here's why:
| Years | $10,000 at 7% (Compound) | $10,000 at 7% (Simple) |
|---|---|---|
| 10 | $19,671.51 | $17,000.00 |
| 20 | $38,696.84 | $24,000.00 |
| 30 | $76,122.55 | $31,000.00 |
| 40 | $149,744.58 | $38,000.00 |
Over 40 years, compound interest earns nearly 4x more than simple interest!
Rule of 72
Quick way to estimate doubling time: Years to double = 72 ÷ Interest Rate
At 6% interest: 72 ÷ 6 = 12 years to double At 8% interest: 72 ÷ 8 = 9 years to double
Tips for Maximizing Interest
For Savings:
- Choose accounts with daily compounding
- Look for high-yield savings accounts
- Maintain minimum balance for best rates
- Consider CDs for higher rates
For Investments:
- Start early — time is your biggest asset
- Reinvest dividends for compound growth
- Avoid withdrawing interest prematurely
- Consider tax-advantaged accounts
Frequently Asked Questions
What's better, simple or compound interest?
For savers: compound interest earns more. For borrowers: simple interest costs less.
Does compounding frequency matter?
Yes! Daily compounding earns more than monthly, which earns more than annual.
What's a good interest rate for savings?
As of 2024, high-yield savings accounts offer 4-5% APY.
Is this calculator accurate?
Yes. It uses standard financial formulas. For official calculations, consult a financial advisor.
Related Tools
- Loan Calculator — Calculate loan payments
- Mortgage Calculator — Home loan calculations
- Investment Calculator — Investment growth
- APY Calculator — Annual percentage yield
Enter your values above to calculate interest instantly.