Interest Rate Calculator

Free advanced interest rate calculator. Find the interest rate and total interest cost of an amortized loan with a fixed monthly payment.

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Interest Rate Calculator: Maximize Your Savings with Interest Rate

Making Your Money Work Harder: A Simple Guide to Compound Interest
Let's be honest: most of us grew up with the habit of saving money. Whether you're in a quiet corner of New York or the hustle and bustle of Chicago, the goal is usually the same - buying that first home, putting the kids through college, or finally hitting that "retirement" button.
But here's the catch: simply "saving" isn't enough. With rising inflation and fluctuating interest rates, leaving your money in a basic savings account is like trying to climb up a down escalator.
That's where compound interest comes in. You have probably heard the term, but it is not just a mathematical concept-it's essentially interest on your interest. This is the secret sauce that transforms small, consistent habits into life-changing wealth over time.
What we will understand today: How compounding works in the real world.
Reality check: Why you need to factor in taxes and inflation to see your true returns.
Smart planning: How to use our advanced calculator to plan your future with precision. By the time you finish reading this, you will know exactly how to put your money to work for you.

What is an Interest Rate?

An Interest Rate is a Cost of Money.
When someone borrows money, their insurer will charge them to use that money for a fixed period of time. When someone saves their money or lends it, their insurer will pay them to borrow that same amount of money for that same fixed time.
Whenever you see an interest rate, it's always expressed as a percentage.
Here is a scenario that everyone is familiar with:
Cost of Borrowing: Assume you are going to borrow $100. Your lender will tell you, "We will lend you the money, but you must pay us back with a fee of 5% per annum." That means your lender has an interest rate of 5%. At the end of one year, you will have repaid $100, and you will also have paid your lender an additional $5 fee. Total repayment amount at the end of one year will be $105.
Reward for Saving/Loaning: After you have saved a certain amount of time and do not need to access that amount for the immediate future, your lender will ask you to place your money in their bank account. The lender will tell you, "Because we are currently using your funds as collateral for our loans, we will pay you an annual fee of 5% for letting us have access to your funds." After one year, you will be returned your full amount plus your annual 5% fee. The total returned amount at the end of one year will be $105.
Why does this exist?
Simply put: money today is worth more than money tomorrow. When you borrow ₹100 from a lender, they lose out on the ability to invest that money or use it for themselves while you hold onto it. As such, it makes sense that lenders would ask for interest on the amount you are borrowing in order to compensate them for the loss of that opportunity. You, the borrower, will pay more than you would have had you saved up to purchase what you needed over a few years.
Therefore, when someone mentions interest rates, think of them as the price to borrow money, or what you can earn for letting go of your money for a short period of time. Interest rates are at the centre of most financial transactions.

How Interest Rates Work in Real Life

Interest rates affect the financial decisions we make daily, and the best way to see them in action is to take a look at three common scenarios that involve borrowing, saving, or investing. When you borrow money and agree to pay interest, borrowing money is considered a form of rental payment to the lender for the opportunity to use their funds. The most common type of loan you would encounter would be a home loan, where the interest paid over a long period represents a significant portion of your overall costs.
There are also car loans available that depend on the interest rate you will be charged and what your ultimate monthly payment will be. Other loans, such as personal loans may be beneficial when working through short-term financial problems but ultimately cost you a lot of money due to accumulating interest charges.
Lastly, when you use credit cards and don't pay off the entire amount due each month, you will have to pay interest on the remaining balance, and credit card interest rates are generally much higher than other types of loans.
When you save money, you earn interest on your balance, and savings accounts earn a small percentage each year. This may not be a large amount but it is still a positive growth factor for your total savings. When you take your money out of your savings account and lock it into a fixed deposit, you get a guaranteed annual percentage rate or fixed rate that will allow your principal amount to compound yet remain safe and protected.
Finally, there are certain investments (i.e., bonds, annuities) that can only be evaluated based on interest rates. The investment types used will ultimately produce different interest rates or rates of return, thereby producing either positive or negative investment results.
When investing in bonds, you're essentially providing funds to either a business or a government agency, who will compensate you with an interest payment until your initial investment is repaid. Similarly, with investment in mutual funds, particularly in the case of debt or hybrid funds, the performance return from those investments can fluctuate with changes in overall economic conditions.
The two forms of the investment, fixed rate and variable rate, differ considerably from one another.
A fixed-rate loan or account will maintain the same interest rate throughout the term of the loan or investment. In other words, you will pay the same amount in interest at the beginning of each month for the entire term.
A variable-rate loan or account has an interest rate that may change at any time. The variable-rate loans are typically linked to an external rate, such as the Government Bank Repo Rate. Thus, if the Government Bank Repo Rate increases or decreases, the combined effect of those changes could ultimately increase or decrease your net return from your investment or your total interest cost.

Main Types of Interest Rates

Simple Interest
Calculated only on the original principal.
Formula: Interest = Principal × Rate × Time
Compound Interest
Nominal Interest Rate
Effective Interest Rate (or Effective Annual Rate - EAR)
Real Interest Rate

Differences Between Fixed Rate and Variable (Floating Rate) Loans:

A Fixed Rate Loan has an interest rate that does not change during the life of the loan (or at the end of a defined period, i.e., 5-10 years) or the entire time frame of the FD/savings. Therefore, your EMI or interest payment will not change regardless of what happens with bank policies or market rates.
A Variable Rate Loan is a loan with a variable or floating rate where the interest rate is adjusted periodically (for example, every 3-6 months or on a quarterly basis) based on a specific benchmark, such as the bank repo rate, EBLR or RLLR. As such, the EMI or interest payment will change based on the changes to these benchmarks that result in changes to the variable interest rate.