Compound Interest Calculator: Introduction

Compound Interest Calculator: Introduction

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Before we can understand how to use compound interest calculator, there is a need to know first, what is compound interest. You are obliged to pay your dues depending on the bank's policies when you borrow money. When the bank lent you money, there will be a charged fee for their service. Depending on the amount of time lent to you, there is an amount charged to the principal with a fixed percentage.

When the principal is added, this kind of interest appear, wherein the added interest will earn money on its own. Compounding - When previous charges on principal is added to the current charges to the original principal amount. A good example for compounding is when an account with the amount of $100 as initial principal that is charged 20% each year would make $120 after the 1st year then $144 on the 2nd year. This is basically how the compound interest calculator works.

More on Compound Interest Calculator

It is important for you to know how the this type of calculator works if you wish to know how much of the money invested in a bank, in the form of savings, or you would like to know the amount of money to pay on the cost of the amount of money you borrowed or simply, the principal amount. The interest can also be compared with simple interest. The term compound interest is a standard in economics and finance. Compound interest calculator is the system that calculates the charges or amount to be paid on the original amount plus the amount accumulated through the charges gained from past.

Compound Interest Calculator: Formula

Simply this type of calculator gets the sum of the accumulated fees of the past added to the fee that is due on the original amount. The yearly formula for the compound interest calculator is: A = p (1+[r/100])n. The p stands for the principal amount or the amount deposited or borrowed. The r stands for the annual rate. The n stands for the years that the amount is deposited or borrowed. The A is the total charges accumulated through the 'n' years. Therefore, if you will borrow money for 3 years the formula would be: A = p (1+[r/100])3. This compound interest calculator formula can be used when you borrow or deposit money in the bank. As payments become more often, the formula also becomes more complex.

Online Calculator

If you think that this calculator formula is a bit complex for you, online calculators are available in your aid. This type of calculator also helps you on the easy calculation on how much is needed to be paid and what is the accumulated interest through time for both borrowing and lending money. The calculator is easy to use and available for all of us online. The available calculator online can give you a quick heads up on the yearly payable rate with just providing the rate of savings and the calculated results of interest in compounding. Now, you can have safe lending and borrowing of money through the compound interest calculator.

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