Compound Interest Calculator
See how compound interest works on your money over time. Set your principal, rate, and compounding frequency and you'll get a year-by-year breakdown of how it grows. Monthly compounding makes more difference than most people expect.
How to use
- Enter your starting amount.
- Add the interest rate.
- Enter how many years you're calculating for.
- Choose compounding frequency. Banks usually do monthly or quarterly.
- Hit Calculate to see the total amount with a year-by-year growth table.
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Compound interest is interest calculated on both the initial principal and the accumulated interest from previous periods. The formula is: A = P × (1 + r/n)^(n×t), where A is the final amount, P is the principal, r is the annual interest rate (as a decimal), n is the number of compounding periods per year, and t is the time in years.
Compounding frequency makes a meaningful difference. ₹1 lakh at 10% compounded annually grows to ₹2.59 lakhs in 10 years. The same amount compounded monthly becomes ₹2.71 lakhs, an extra ₹12,000 purely from frequency. This is why FDs that compound quarterly outperform those with annual compounding at the same stated rate, and why mutual funds that reinvest dividends outperform dividend-payout options over the long run.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is earned only on the original principal and stays flat each year. Compound interest earns interest on interest, causing growth to accelerate over time. For a 10-year investment at 10%, SI gives ₹1L interest on ₹1L principal; CI gives ₹1.59L, a 59% advantage.
What does compounding frequency mean?
It is how often interest is calculated and added to the principal. Annual = once per year, quarterly = 4 times, monthly = 12 times, daily = 365 times. The more frequent the compounding, the higher the effective return, even if the stated annual rate is the same.
What is the Rule of 72?
Divide 72 by the annual interest rate to estimate how many years it takes to double your money. At 6% it doubles in 12 years; at 9% in 8 years; at 12% in 6 years. It is an approximation, but accurate enough for quick mental math.
Does compound interest apply to loans too?
Yes. Home loans, car loans, and personal loans all accrue compound interest on the outstanding balance. This is why early EMI payments are mostly interest, since the principal is still large. Making part-prepayments early in the loan tenure saves disproportionately more interest than prepaying late.