Interest Calculator

Interest is the cost of borrowing money — or the reward for saving it. Whether you're taking out a loan or putting money in a savings account, understanding how interest works will save or earn you significant amounts over time. Simple interest is calculated only on the principal amount. Formula: Interest = Principal × Rate × Time. For example, $5,000 at 6% for 3 years = $900 in interest. Simple interest is used for short-term loans, car loans, and some personal loans. Compound interest is calculated on both principal AND previously earned interest. This causes exponential growth. Most savings accounts, mortgages, and credit cards use compound interest — which works for you when saving, but against you when carrying debt. Annual Percentage Rate (APR) vs Annual Percentage Yield (APY): APR is the nominal rate; APY includes compounding effects and shows the true yearly return or cost. Always compare APY when evaluating savings accounts. Credit card interest: If you carry a balance, credit cards compound daily and charge 15–25% APR. Paying only the minimum can cause your balance to grow despite regular payments.