Principal amount
₹1000
Total interest
₹500
Total amount
₹1500
What is Compound Interest?
Compound Interest (CI) is the interest calculated on the initial principal, which also includes all the accumulated interest from previous periods. It allows your investment or loan to grow at a faster rate than simple interest, due to the effect of compounding over time.
Compound Interest Formula Explained
To calculate Compound Interest, the standard formula is:
A = P × (1 + r/n)n×t
Where:
- A = Total amount (principal + interest)
- P = Principal amount
- r = Annual interest rate (in decimal, i.e., 10% = 0.10)
- n = Number of times interest is compounded per year
- t = Time in years
How the Compound Interest Calculator Works
This calculator helps you estimate how much your money will grow over time based on:
- The principal amount invested or borrowed
- The annual interest rate
- The time duration in years
- The compounding frequency (annually, semi-annually, quarterly, monthly)
Benefits of Compound Interest
- Faster Growth: Interest earns interest, leading to exponential growth over time.
- Ideal for Long-Term Investing: Especially effective for retirement planning and wealth creation.
- More Accurate: Reflects the true value of investment growth or loan repayment.
Compound Interest Example Scenario
| Principal | Rate of Interest | Time Period | Compounding | Total Interest | Total Amount |
|---|---|---|---|---|---|
| ₹1,00,000 | 8% | 5 Years | Annually | ₹46,933 | ₹1,46,933 |
The power of compounding lies in reinvesting earned interest, making it ideal for long-term financial growth.
Explore more calculators: Simple Interest, SIP Calculator, FD Calculator, Home Loan EMI