If you are borrowing or lending money then one thing you certainly would not want to ignore is the interest rate charged. Interest rate is percentage charge on the use of the principal amount borrowed or lent. This is usually added to principal whenever the loan is to be repaid. To determine the interest compounded periodically, the use of an interest calculator is applied. The following are useful details you ought to know about the interest calculator.
Interest calculator is a tool used to determine the value of compounded interest to be paid after some period of time. This time period could be daily, monthly, quarterly, half-yearly or annually. The calculation it by applying the compound interest formula. Thus, the tool is programmed to consider variables like Principal, the Rate, and then number of years it will take you to repay the loan.
Types of interest calculator
There are many types of interest calculators you will find. However, there are basically two common types – those used in calculating simple interest and those used in calculating compound interest.
The simple interest refers the amount of interest paid on the principal amount alone while compound interest is the interest paid on both the principal and accrued interest. Whether you are interested in borrowing or lending, you will find either of these types of calculators very useful. However, the compound interest calculator is the one more often applied because most mortgages, loans or amortizations are calculated based on compound interest.
Interest calculator online
There are brands of interest calculators you will find online. If you are borrowing or lending then you may want to determine how much interest is to be paid. By taking advantage of one of the many tools provided in many websites you should be able get quick results and promptly make financial decisions.
All you need do is to put figures for the principal, the interest rate, and the number of years or tenure of the loan. Some customized calculators may include items like compound period, inflation rate, tax rate, etc. Whatever the custom nature of the tool, the principle of using compound interest is applicable to them.
Importance of the Interest Calculator
This tool has many benefits, which include:
- knowing the amount you will pay monthly as interest on the loan
- Comparing the value of different loan terms
So, with the details provided above, you now can take advantage of the interest calculator.