Interest Calculator
How much interest will you earn — or pay? Calculate compound savings growth, loan interest costs, and compare rates side by side.
Try a scenario
How to Use This Calculator
Tab "Earn Interest"
Enter your deposit amount, annual rate, term, and choose a compounding frequency. Add an optional monthly contribution to model regular saving. The result shows total interest earned, final balance, and a bar chart of growth over time.
Tab "Pay Interest"
Enter the loan amount, annual rate, and term. The calculator shows total interest paid, monthly payment, and effective cost as a percentage of the loan — the true price of borrowing.
Tab "Compare"
Enter a principal and term, then set three different rates. The side-by-side table shows interest earned and final balance for each scenario — useful for comparing savings accounts, bonds, or investment options.
The Formulas
I = P × r × t
where P = principal, r = annual rate (decimal), t = time (years)
Compound interest:
A = P × (1 + r/n)^(n × t)
Interest = A − P
where n = compounding periods per year
With regular contributions:
A = P(1 + r/n)^(nt) + PMT × [((1 + r/n)^(nt) − 1) / (r/n)]
where PMT = monthly contribution × 12/n
Loan monthly payment (amortisation):
PMT = P × r_m × (1 + r_m)^n / ((1 + r_m)^n − 1)
where r_m = annual rate / 12, n = total months
Total loan interest:
Total interest = (PMT × n) − P
All calculations use standard financial mathematics. No country-specific tax rates are applied. Results are pre-tax estimates.
Worked Examples
Example 1 — Savings: $5,000 at 4.5% for 3 years (monthly compounding)
A saver deposits $5,000 in a high-yield account at 4.5% annual rate, compounding monthly (n = 12).
Calculation: A = 5000 × (1 + 0.045/12)^(12×3) = 5000 × (1.00375)^36 = $5,718.79. The extra $718.79 is pure compound growth — no contributions required.
Example 2 — Loan: $20,000 at 8% for 5 years
A borrower takes a $20,000 personal loan at 8% annual rate, repaid over 60 months.
The monthly payment is ~$405.53. Over 60 months, total interest is $4,331.80 — equivalent to 21.7% of the original loan amount as the true cost of borrowing.
Example 3 — Compare: 3.5% vs 5.0% vs 7.0% on $10,000 over 10 years
Comparing three savings or investment accounts with different annual rates, monthly compounding.
| Rate | Interest earned | Final balance |
|---|---|---|
| 3.5% | $4,179.79 | $14,179.79 |
| 5.0% | $6,470.09 | $16,470.09 |
| 7.0% ★ | $10,070.43 | $20,070.43 |
An extra 3.5 percentage points of rate (3.5% to 7%) more than doubles the interest earned over 10 years — from $4,180 to $10,070. This is the power of compounding: small rate differences compound into large outcome differences over time.
Understanding Interest: Key Concepts
Simple vs Compound Interest
Simple interest is calculated only on the original principal. If you deposit $1,000 at 5% for 3 years, you earn $150 total (3 × $50). It's linear — the same amount each year. Simple interest is common in short-term deposits and some bonds.
Compound interest earns interest on both the principal and previously accumulated interest. The same $1,000 at 5% compounded annually grows to $1,157.63 over 3 years — $7.63 more than simple, and the gap widens dramatically over longer periods. Albert Einstein reportedly called compound interest "the eighth wonder of the world."
Compounding Frequency
The more often interest is compounded, the more you earn (or pay). For a 6% annual rate on $10,000 for one year:
| Frequency | Periods/year | Balance after 1 year | Interest |
|---|---|---|---|
| Annually | 1 | $10,600.00 | $600.00 |
| Quarterly | 4 | $10,613.64 | $613.64 |
| Monthly | 12 | $10,616.78 | $616.78 |
| Daily | 365 | $10,618.31 | $618.31 |
The difference within a year is modest, but over decades it becomes meaningful. For savings, choose accounts that compound daily or monthly. For loans, a monthly-compounding loan costs slightly more than an annually-compounding one at the same stated rate.
The Rule of 72
A fast mental shortcut: divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6%, money doubles in 72 ÷ 6 = 12 years. At 9%, in 8 years. At 3%, in 24 years. This rule assumes annual compounding and works best for rates between 2% and 20%.
Effective Annual Rate (EAR)
The nominal rate is the stated rate (e.g. 6%). The effective annual rate accounts for compounding and represents the true yearly return: EAR = (1 + r/n)^n − 1. A 6% nominal rate compounded monthly gives an EAR of 6.168%. When comparing savings accounts with different compounding frequencies, always compare EAR — not the nominal rate.
Loan Amortisation
Most consumer loans (mortgages, auto loans, personal loans) use an amortising structure: fixed monthly payments where early payments are mostly interest, and later payments are mostly principal. This is why overpaying in the early years saves disproportionately more interest — you reduce the principal faster, shrinking the interest base for all future payments.
Frequently Asked Questions
Calculate for Your Country
For country-specific savings and investment calculators that account for local tax rules, ISA limits, KiwiSaver, etc.: