Calculate the interest on a loan or the accumulation of interest on savings.
Principal is the initial amount of money owed or saved in an interest-bearing account. This sounds complicated, but it’s just the amount of money you take out in the loan or save in your savings account. Check out my post on savings accounts to learn more about factors to consider for accounts.
This is the amount of interest added every compounding period. If you know your Annual Percentage Rate (APR) but not your interest rate, simply divide your APR by the number of compounding periods in a year. For example, if you have 24% APR and monthly compounding, your interest rate would be 24 / 12 = 2%. Learn more about interest rates from my post on the basics of finance. If you are ever confused about the difference between APR and APY, Ally Bank has a great article that clears it up.
Compounding period is just how often interest is added. It is important to know because interest can be earned on interest, and for larger sums of money compounding period can have a big impact.
Time In Years
The length of time that the loan or savings product will earn interest, which is fixed for CDs but variable for some loans and savings accounts.
If you like this calculator, check out some of the other ones.