## Result

- The final amount with simple interest is: The final amount with compound interest is:

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- The final amount with simple interest is: The final amount with compound interest is:

To use this tool, start by entering the **initial amount**, which
is the amount of money you are going to borrow.

In the second box, include the **time period for which you requested the loan**,
whether it is 1, 2, 10, or 20 years.

In the last box, indicate the **annual rate** that the financial
entity will apply to the granted loan, click on “Calculate interest” and the calculator will give
you the result.

To calculate compound interest, click on Interest Type: “Compound” and complete the 3 additional fields.

In this type of calculations, it is essential to understand well the details of the loan in question because they have a crucial influence on the result.

If you want to know more about what they are, what types exist, and how they can be calculated, keep reading.

Interest is the **value that we add to a loan or a deposit** that
must be paid.

To perform the interest calculation, it is necessary that you know what type of loan you have and what are the rules imposed by the lender.

For example, credit cards charge you interest every day although they normally have a monthly period, if the amount is owed due to an overdraft in the account.

Lenders can offer loans with variable interest rates and diverse periodicity, for example, monthly or annually.

Most lenders tend to set annual rates, but it may be that you have taken out a loan whose
interests expire monthly, if this is your case, **to convert the annual interest rate
into monthly you must divide it by 12**.

Before continuing with the calculation, it is important that you know how to distinguish between the existing types of interest. The most used are fundamentally two: simple and compound.

It is the simplest calculation and is generally used for short-term loans.

The capital tends to remain constant over the years and therefore **the
interest rate never increases**.

An example would be a loan of €1,000 with a 5% annual interest rate.

In this case, **the interest will be calculated periodically and added again to
the principal amount**.

In some loans, this may occur once a year, while in others it may happen every month or quarter. You will need to know how many times a year the interest will become compound.

If for example you take out a loan with a capital of €1,000 and an annual interest of 10%, at the end of the first year you would have to return €1,100.

However, at the end of the second year the amount of €1,100 would receive an additional 10% interest reaching up to €1,210, and so on.

For the most common loans, which are usually those requested for a house, a car, or studies, the most effective way is to build an amortization table.

This table will detail all payments, monthly interest, and capital amounts, as well as the remaining loan balance at any given time.

But to build your amortization table you will need to note certain data:

- The
**type of interest**, whether it is simple or compound. - The
**period of time**the loan lasts. - The
**monthly payment**, if there is one. - And the
**initial amount**on which you are paying these interests.

Once you have this data you can proceed to apply the relevant formula.

If your loan expires **with simple interest**, you requested it
for the amount of €100, it has a duration of one year and an annual interest rate of 6% the formula
you must apply is:

- Interest = Principal Amount x Interest Rate x Time in years; €100 x 0.06 x 1 = €6
- Total amount = Initial Amount + Interest; €100 + €6 = €106

Most loans are not so simple to calculate. It is likely that you have **loans
whose term expires in several years**, and it is also possible that over these years
your debt will grow.

This means that it is a compound loan, it is a bit **more complex to calculate,**
but don't worry because we are going to explain how to do it.

We continue with the same figures as above: a loan of €100 with an annual interest of 2%, but this time instead of for one year it will be for three.

We will have to perform more than one operation.

The **first operation** is practically identical to the previous
one:

- Interest = Principal x Interest Rate; €100 x 0.06 = €6
- Total amount = Initial Amount + Interest; €100 + €6 = €106

But when it comes to **calculating the second year**, things
change:

- Year 2 Interest = Total amount year 1 + (Total amount year 1 x Interest Rate)
- Total amount to pay year 2 = €106 + (€106 x 0.06) = €112.36

The **third year** has a formula quite similar to the one we used
for year 2:

- Year 3 Interest = Total amount year 2 + (Total amount year 2 x Interest Rate)
- Total amount to pay year 3 = €112.36 + (€112.36 x 0.06) = €119.10

Once you have learned all these formulas to manually calculate the interest, if you want you can also export them to an Excel playing with the columns, and thus semi-automate the process, so that you can share it with your clients or friends, it all will depend on the use you must give it.

In today's article, you have learned how to use the online interest calculator to know the total amount to pay of your loan in an automated way, and, in addition, we have taught you how to do it step by step and with all possible variables, whether it is of simple type or compound type.

We hope to have been useful to you. If you have reached this point with a good taste in
your mouth, **do not forget to share this tool**** on your
social networks**, that way your contacts can also get to know this community.