Compound Interest Calculator

Simple interest is calculated only on the original principal, while compound interest is calculated on principal plus any accumulated interest. On most consumer loans — mortgages, auto loans, personal loans — the math works differently than savings accounts: you're charged interest on the remaining balance each month, and the payment schedule is set by amortization. For example, a $25,000 auto loan at 7.0% for 5 years costs about $4,700 in total interest under standard amortization. If that same loan used simple interest on the full $25,000 for 5 years, you'd pay $8,750 — but amortization means you're not borrowing the full $25,000 for the whole term, since you pay it down monthly. Where compounding really bites is credit cards, which often compound daily. A $5,000 card balance at 22% APR compounding daily grows by roughly $3 per day in interest alone if you don't pay it down. To see how a fixed-payment loan compares, run the numbers through our loan calculator and check the total interest line.

Because interest is charged on your remaining balance, and your balance is highest at the start. On a $320,000 mortgage at 6.5% for 30 years, your monthly payment is about $2,023. In month one, roughly $1,733 goes to interest and only $290 to principal. By year 15, the split flips — about $1,010 goes to interest and $1,013 to principal. By the final year, nearly the entire payment reduces principal. This front-loaded structure is why paying extra early saves so much: an extra $200 per month starting in year one on that same loan could shave about 5 years off the term and save roughly $90,000 in interest. The effect is even more dramatic on shorter loans. On a $25,000 auto loan at 7.0% for 5 years, your first payment sends about $146 to interest and $349 to principal, but by month 48 it's about $3 to interest and $492 to principal. Our mortgage calculator lets you test extra-payment scenarios directly.

It comes down to cash flow versus total cost. On a $320,000 loan at 6.0%, a 30-year term costs about $1,919 per month and roughly $370,000 in total interest. A 15-year term at 5.5% (shorter terms usually get lower rates) costs about $2,614 per month but only about $150,000 in total interest — a savings of roughly $220,000. The trade-off is $695 more per month. If you can comfortably afford the higher payment and have a solid emergency fund, the 15-year wins by a wide margin. If the higher payment would stretch you thin or block retirement contributions, take the 30-year and make extra principal payments when you can. A middle path: take the 30-year for flexibility, then pay it like a 15-year. You'd finish early without the contractual obligation. Compare both scenarios side by side with our mortgage calculator before deciding.

More than most people expect, especially on long loans. On a $320,000 30-year mortgage, the difference between 6.0% and 7.0% is about $205 per month — $2,023 versus $1,828 — and roughly $77,000 in extra total interest over the life of the loan. On a $25,000 5-year auto loan, the gap between 6.0% and 9.0% is about $32 per month and $1,900 in total interest. The lesson: a single percentage point on a large, long loan can cost tens of thousands. That's why shopping rates matters more than almost anything else. Improving your credit score from 680 to 760 can drop a mortgage rate by 0.5% or more, saving about $38,000 on that same $320,000 loan. Even on smaller loans, the math holds — a $10,000 personal loan at 12% versus 18% over 3 years differs by about $1,000 in total interest. Use our loan calculator to plug in competing offers and compare the total interest line directly.

Extra payments go straight to principal, which reduces the balance that interest is calculated on — and the effect compounds over time. On a $320,000 mortgage at 6.5% for 30 years, adding $200 per month to your regular payment could pay the loan off about 5 years early and save roughly $90,000 in interest. Even a single extra payment per year helps: one additional $2,023 payment annually on that loan saves about $55,000 and cuts roughly 4 years off the term. The earlier you start, the bigger the impact, because early payments knock out the highest-interest portion of the schedule. On a $25,000 auto loan at 7.0% for 5 years, adding $100 per month pays it off about 8 months early and saves around $230 in interest. Before making extra payments, confirm your lender applies them to principal rather than prepaying future interest, and check whether your loan has a prepayment penalty. Our auto loan calculator can model extra payments on shorter loans.

No — the results show principal and interest only, which is the core of any loan payment. For mortgages, your actual monthly bill often includes property taxes, homeowners insurance, and possibly PMI or HOA dues. On a $320,000 mortgage at 6.5% for 30 years, the principal-and-interest payment is about $2,023, but with $400 in taxes, $150 in insurance, and $200 in PMI, the real payment could be around $2,773. That's a 37% difference — significant enough to change what you can afford. Auto loans are simpler: the payment shown is usually close to what you'll pay, though dealers may add gap insurance, extended warranties, or documentation fees into the financed amount, which raises both the principal and the monthly payment. Origination fees on personal loans work the same way. If you want a truer picture, add estimated fees to the loan amount before calculating. Our mortgage calculator includes optional fields for taxes and insurance to give you a closer estimate of your full monthly obligation.