Finance Calculators

Compound interest is interest paid on interest already earned, not just on the original deposit. Each period the account credits interest, that amount joins the balance, and the next period's interest is calculated on the larger total. Early on, the difference from simple interest is small enough to ignore. Over a decade or more, the gap widens sharply, because a fixed percentage applied to a bigger number every year produces bigger dollar gains every year, not a constant amount.

A quick way to size up growth without running the full formula is the Rule of 72: divide 72 by the annual rate to estimate years to double. At 7%, that's about 10.3 years; at 9%, about 8 years. On the compound interest calculator's own worked example, $10,000 growing at 7% compounded monthly with $100 added each month reaches $37,405.09 after ten years, of which $15,405.09 is interest the account generated on its own.

Compounding frequency matters less than most people assume. On $10,000 at 7% for ten years with no added contributions, annual compounding reaches $19,671.51 while daily compounding reaches $20,136.18, a gap of under $500. The stated rate and how long the money stays invested move the balance far more than whether interest compounds monthly or daily, which is why comparing accounts by their disclosed APY, a figure that already folds compounding frequency in, is more useful than comparing compounding schedules directly.

A fixed-rate loan charges the same monthly payment for its entire term, but what that payment actually does changes every month. Interest owed is calculated fresh each month as the current balance times the monthly rate; whatever is left of the fixed payment after that goes toward principal. Because the balance starts at its highest point, the earliest payments are mostly interest, and the principal share grows a little every month as the balance shrinks.

On the loan payment calculator's own $300,000, 6.5%, 30-year worked example, the first month's interest alone is $1,625.00 out of a $1,896.20 payment, leaving just $271.20 to reduce the balance. The split keeps shifting from there, but slowly: on that exact loan, the principal portion of the payment doesn't overtake the interest portion until month 233, roughly 19 years into a 30-year term, well past the halfway point most borrowers would expect.

Because interest each month is charged on whatever balance remains, extra money applied directly to principal reduces the balance the next interest calculation is based on. On that same $300,000 loan, an extra $200 a month toward principal from the first payment onward cuts total interest from $382,633 to about $279,185 and pays the loan off roughly 6.9 years early. Some servicers apply extra payments to next month's due date instead of principal by default, so it's worth confirming directly.

Compound interest and loan amortization are the same underlying math pointed in opposite directions. In a savings or investment account, interest is added to the balance and then earns its own interest, so the balance grows on a curve that gets steeper the longer money stays invested. On a loan, interest is charged on the outstanding balance every month, so an unpaid balance grows the same way, except the account is a debt instead of an asset.

Credit cards make the parallel obvious: issuers generally compound interest daily on any unpaid balance, so a balance carried for months compounds against the cardholder the same way a savings deposit compounds for them, just in reverse. A fixed-rate mortgage or auto loan compounds differently, through monthly amortization rather than daily accrual, but the underlying principle is identical: the longer a balance, positive or negative, sits at a given rate, the more the math accelerates.

Neither calculator on this site tells you what to do with a specific balance; both simply run the math on numbers you supply, whether that's a starting deposit and a rate, or a loan amount and a term. Running an actual balance, rate, and time horizon through the relevant calculator, rather than relying on a rule of thumb, is the more direct way to see how a specific savings goal or loan actually plays out over time.