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What is the Actual meaning of Compound Interest?

Compound interest is one type of interest that adds interest to the Principal amount of a loan. It is a compounding interest i.e. interest on interest. Compound interest varies from the simple interest, where simple interest is the interest taken for the term or duration or period of the loan. But coming to the Compound interest it is interest on interest.

Difference between the Compound Interest & Simple Interest?

Simple Interest is based on the Principal amount and calculated according to the remaining balance of the Principal amount. Simple interest does not include any compounding and it can be applied over a term or time duration or a period of time while coming to the Compound Interest, in which the interest is added to the Principal amount, it includes compounding.

How to Use a Compound Interest Calculator online in a Simple way?

Our Free online Compound Interest calculator is precise, quick and very easy to use and most importantly free to use. Only thing is you should be aware of the Principal amount, rate of interest, Interest added, and the tenure. All you need to do is enter the respective values in the respective fields. By using these four things you can simply calculate the Annual Compound Interest.

Free Compound Interest Calculator Online:

Simple Procedure for Using a Compound Interest Calculator Online:

  • Enter the Principal amount in the Principal amount field.
  • Enter the rate of interest in the Interest Rate field.
  • Enter the number of times the interest is added in the Interest Added field.
  • Enter the number of years or term or duration or period in the Tenure field.
  • Now click the Calculate Button.
  • Our Free Compound Interest Calculator online will show you the Annual Compound Interest.

How to Calculate Compound Interest Manually?

In olden days before the Simple Interest calculator, one used to calculate the simple interest by using the formula. It is a universal Compound interest formula, you can use the formula to calculate the compound interest manually.

Compound Interest Formula:

‘P = P (1 + r/n)

P’ – Compounding Interest.

P – Principal amount.

r-Nominal annual interest rate.

n – Stands for Compounding frequency.

t – Number of years for which the interest is applied.

Simple Steps to Calculate the Compound Interest Manually with Formula:

  • Substitute the Principal amount in ‘P’.
  • Substitute the nominal interest rate in ‘r’.
  • Substitute the compounding frequency in ‘n’.
  • Substitute the total number of years in‘t’.
  • After substituting the Principal amount in ‘P’, nominal interest rate in ‘r’ and compounding frequency in ‘n’ and total number of years in ‘t’ in the above formula, you can get the P’ is Periodic Compounding.

Total Compound Interest Formula:

‘P = P + I

I = P (1 + r/n) – P

P’ – Compounding Interest.

P – Is Principal amount.

r-Nominal annual interest rate.

n – Stands for Compounding frequency.

t – Number of years for which the interest is applied.

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