Interest Rate Calculator
Calculate interest rates for loans, investments, and savings accounts
Whether you're comparing loan offers, evaluating investment returns, or calculating savings growth, our interest rate calculator helps you understand the true cost or benefit of different interest rates across various financial products.
Interest Rate Comparison
Common Interest Rates
APR vs APY
APR: Annual Percentage Rate - simple interest rate
APY: Annual Percentage Yield - includes compounding
APY is always higher than APR when compounding occurs.
How Interest Rates Work
Simple Interest Formula
Formula: I = P × r × t
Where:
- I = Interest earned
- P = Principal amount
- r = Annual interest rate (decimal)
- t = Time in years
Example: $1,000 at 5% for 2 years = $1,000 × 0.05 × 2 = $100
Compound Interest Formula
Formula: A = P(1 + r/n)^(nt)
Where:
- A = Final amount
- P = Principal amount
- r = Annual interest rate (decimal)
- n = Compounding frequency per year
- t = Time in years
Example: $1,000 at 5% compounded monthly for 2 years = $1,104.89
Frequently Asked Questions
What's the difference between APR and APY?
APR (Annual Percentage Rate) is the simple interest rate, while APY (Annual Percentage Yield) includes the effect of compounding. For savings accounts, look for higher APY. For loans, look for lower APR.
How does compounding frequency affect returns?
More frequent compounding (daily vs annually) increases your returns, but the effect diminishes with higher frequencies. The difference between daily and continuous compounding is minimal.
What is the real interest rate?
The real interest rate is the nominal rate minus inflation. It represents your actual purchasing power gain. If you earn 5% but inflation is 3%, your real return is approximately 2%.
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