Compound Interest Calculator

What is Compound Interest?

Simply put, the interest calculated on your initial investment and the cumulative interest determined from the previous periods gives you compound interest. The interest you earn on your initial investment gets added to the principal amount, where the next interest amount is calculated on this new amount, allowing your investment to grow consistently during the investment period.

In other words, compound interest is the 'interest earned on the sum which was previously earned as interest.' The longer you keep your funds invested, the more you will benefit from growing investments as your money keep multiplying over time.

To calculate the future value (FV) of your investment with compound interest, you can use this simple compound formula-

A = P (1 + r/n) ^nt

To accurately calculate your compound interest earnings, you must know the following-

• Principal investment amount
• Expected rate of return on the investment
• The number of years of investment
• The number of times the interest is compounded

Or you can simply use the compound interest calculator available on our website to determine your compound earnings. All you need to do is enter your investment amount, the number of years, and the expected rate of returns. And the calculator will help you plan your investments accurately.

How Does Compound Interest Work?

Whether you want to invest funds for your child's education, your family's secure future, or achieve your goal of wealth creation, investing with compound interest allows you to multiply your wealth significantly over time. On the other hand, if you have applied for a loan on compound interest, any delays can increase your interest payments.

The compounding process starts with you earning interest on your principal sum, which is added to the initial investment amount. When your interest is due again, it will consider the new total amount (principal + interest) and add your interest earnings to it. This power of compounding will keep on adding interest to the total investment amount as it continues to grow.

Over time, the compound interest cycle can build your funds substantially over the initial investment. Here are the various factors that determine your compound interest returns-

• Rate of Interest- Higher the interest rate, the higher the interest amount compounded on your investment
• Time- Compound formula works to grow your funds over time, so the longer you keep your funds invested, the higher your growth will be

Whatever your investment priorities or financial goals are, you can harness the power of compounding to ensure you can achieve these goals seamlessly.

Compound Interest Formula and How to Calculate Compound Interest

Tata Capital's compound interest calculator uses a simple compound interest formula to arrive at the future value of your investment-

A = P (1 + r/n) ^nt where,

• A = Total amount or the future value of the investment
• P = Principal amount
• r = Rate of interest
• n = the number of times interest is compounded in a period
• t = number of years

You can even use an easy-to-use calculator to calculate compound interest online. Here's an example to help you better understand the compound interest formula.

Say you invest Rs. 20,000 at an annual rate of 5% compounded annually for 5 years.

Year 1

Interest = 20,000 X 5/100 = Rs. 1000; Amount = Rs. 21,000

Year 2

Interest = 21,000 X 5/100 = Rs. 1050; Amount = Rs. 22,050

And so on. Now, using the compound interest formula, your final investment earnings at the end of 5 years become-

A = 20,000 (1 + 0.05)⁵ = Rs.  25,525 and the interest earnings come to Rs. 20,000

Want to make your investment planning even simpler? Use an online calculator to calculate compound interest. Check out our easy-to-use online calculator; enter the variables, including principal investment amount, investment period, and the applicable rate of interest.

And voila! Our online tool will give you accurate results within seconds!

How to Use Compound Interest Calculator by Tata Capital?

When you invest your hard-earned funds, you want to make sure you get the best returns to meet your various financial goals. Compounding your investment earnings is a sure-shot strategy to grow your funds significantly over time. But not knowing how much returns to expect can impact your investment planning strategy.

So before you decide to make investments, use a calculator tool to calculate compound interest online. Our online compound interest calculator is a convenient tool that lets you determine the expected returns at the end of the investment period.

All you need to do is enter the initial investment amount, the number of years you wish to stay invested, and the applicable rate of interest, and get the exact amount within seconds using the compound interest formula. You can enter different combinations in the compound interest calculator to arrive at your desired returns at a suitable investment amount.

Benefits of Using a Power of Compounding Calculator

There are numerous benefits of using the power of a compounding calculator-

• Easy Calculations

A compound interest calculator is an easy-to-use tool where you can experiment with various combinations of the investment amount, investment period, and rate of interest, and the calculator will do the heavy calculations for you.

• Help Plan Your Investments

Investing your hard-earned money requires great financial planning and a comprehensive idea of the expected returns on different investment plans. A monthly compound interest calculator will make things easy and help you decide how much you need to invest in fulfilling all your financial goals.

• Helps Compare Different Investment Options

If you're not sure which investment avenue will suit your financial goals the best, use a cumulative interest calculator to compare various options and invest in the best one.

• Free Online Tool

Tata Capital's interest calculator is a free online tool. You can use this tool to arrive at accurate estimates within seconds.