Interest Calculator

Related guide

Mortgage, Interest and Percentage Calculators, and the Numbers They Do Not Show You
The mortgage page recomputes as you type, the interest page waits for a button, and the percentage page answers a division by zero with 0%. Everything below was read out of each page's own script: the annuity formula, the rounding drift in the repayment table, the growth-curve point that lands a year past your term, and the axis label that is ten times off.

The three ways to grow money

The tabs cover three genuinely different situations, and the distinctions between them are the point of the page. Simple interest pays on the original principal only, so the balance grows in a straight line: interest is principal times rate times time. It is the model behind most short-term loans, and behind anything where interest is paid out rather than left to accumulate.

Compound interest pays on the principal and on the interest already earned, so the growth curve bends upward. The difference between the two is negligible over a year and enormous over thirty, which is exactly why compounding is worth calculating rather than estimating — the gap is where most of the return on a long-term investment actually comes from.

The third tab, DCA, covers the case where you do not have a lump sum to start with. Instead you invest a fixed amount every month, and each contribution starts earning from the moment it goes in. This is how most people actually invest, and the arithmetic differs from both of the others because the money arrives over time rather than all at once.

How the calculations are done

Simple interest is the straightforward one: principal multiplied by the annual rate multiplied by the term in years, with the term expressed as years plus any months divided by twelve, so eighteen months is entered as one year and six months.

Compound interest uses the standard formula with the compounding frequency applied per period. Choose annual or monthly, and the annual rate is divided accordingly — the monthly option compounds at a twelfth of the annual rate twelve times a year, which comes out slightly higher than the annual option at the same quoted rate. That difference is real, not a rounding artefact, and it is why the compounding frequency is asked for separately.

The DCA tab invests the same amount each month at a monthly rate of a twelfth of the annual figure, and you choose whether each contribution lands at the end of the period or the start. Paying at the start is worth slightly more, because every contribution earns for one extra period. All three tabs draw a growth curve, and the DCA tab additionally lists every period with the cumulative amount invested, the value at that point, the profit and the return on investment so far, with the whole schedule exportable as a CSV file.

Reading the numbers honestly

Every tab reports the total value, the total interest or return, and the return as a percentage of what was put in, so the three can be compared directly. What none of them model is volatility. A DCA schedule here assumes a constant monthly return, and real markets do not deliver one — the point of investing monthly in practice is to average out a price that moves, whereas this calculation averages a fixed rate. Treat the output as the arithmetic of a constant return, which is useful for setting expectations and useless for predicting a portfolio.

Two input rules are worth knowing. All three tabs require a positive principal, rate and term, so a zero rate is rejected rather than treated as a special case. And the rate is a nominal annual figure divided per period, which is the common convention but not the only one — a rate quoted as effective annual will give a slightly different answer.

FAQ

What is the difference between simple and compound interest?
Simple interest is always calculated on the original principal, so the growth is a straight line. Compound interest is calculated on the principal plus the interest already added, so the growth accelerates. Over one year the gap is small; over twenty years it dominates the result.

Which compounding frequency should I choose?
Use the one your account actually applies. Monthly compounding at a quoted annual rate produces a slightly higher result than annual compounding at the same rate, because interest starts earning part-way through the year. If you are not sure, the monthly option is the more common arrangement.

What does the DCA tab calculate?
The value of investing a fixed amount every month for the term, with each contribution earning from the point it is made. You choose whether the contribution is made at the start or the end of the period; start-of-period is slightly better because each contribution earns for one extra period.

Should I put the contribution at the start or the end of the period?
Match how you actually invest. A regular transfer on the first of the month behaves like a start-of-period contribution; one made at the end of the month behaves like the end-of-period option. The difference is one period of growth per contribution, so it compounds into a visible amount over a long term.

Does this model real market volatility?
No. Every tab assumes a constant rate of return, which is exactly what markets do not provide. The DCA figure is the arithmetic of a steady return — useful as a baseline for what regular investing is worth in principle, but not a prediction of what any particular investment will do.

Can I use it for a loan instead of an investment?
The arithmetic is the same in principle, but the sign conventions are set up for growth rather than repayment. For a loan, the mortgage calculator is built for the job and handles the two standard repayment methods as well.