Before we can understand how to use compound interest calculator, there is a need to know, what is a compound interest. You are obliged to pay your dues depending on the bank's policies when you borrow money. When the bank lends you money, there will be a charged fee for their service. Depending on the amount of time lent to you, there is an amount charged to the principal with a fixed percentage.
When the principal is added, this kind of interest appears, wherein the added interest will earn money on its own. Compounding happens when previous charges on principal is added to the current charges of the original principal amount. A good example for compounding is when an account with the amount of $100 as initial principal is charged 20% each year. This would make $120 after the 1st year, then $144 on the 2nd year. This is basically how the compound interest calculator works.
It is important for you to know, how this type of calculator works, if you wish to know the amount of money invested in a bank in the form of savings. This is also good to know if you would like to know the amount of money to pay off the cost of the amount of money you borrowed. The interest can also be compared with simple interest. The term compound interest is a standard word in economics and finance. Compound interest calculator is the system that calculates the charges or amount to be paid on the original amount, plus the amount accumulated through the charges gained.
This type of calculator gets the sum of the accumulated fees from the past then add them to the fee that is due on the account. The yearly formula for the compound interest calculator is: A = p (1+[r/100])n. The p stands for the principal amount or the amount deposited or borrowed. The r stands for the annual rate. The n stands for the years that the amount is deposited or borrowed. The A is the total charges accumulated through the 'n' years. Therefore, if you will borrow money for 3 years the formula would be: A = p (1+[r/100])3. This compound interest calculator formula can be used when you borrow or deposit money in the bank. As payments become more often, the formula also becomes more complex.
If you think that this calculator formula is a bit complex for you, online calculators are available in your aid. This type of calculator also helps you on the easy calculation with how much is needed to be paid and what is the accumulated interest through time. The calculator is easy to use and available for all of us. The available calculator online can give you the answer to the yearly payable rate with just providing the rate of savings and the calculated results of interest in compounding. Now, you can have safe lending and borrowing of money through the compound interest calculator.
More of compound interest formula and other loan calculators visit William Ava's Blog Site click here.
