Compound interest calculator

The compound interest calculator is an online financial tool. It allows investors to calculate the estimated compound interest earned on the invested capital over a specific period. An online compound interest formula calculator is helpful for investors as it helps them estimate their potential compound interest. This results in better financial planning and portfolio building.

What Is Compound Interest?

Compound interest is the interest calculated on the total value of the initial investment and interest earned in the previous year. Unlike simple interest, compound interest grows exponentially over an investment period.

The compound interest offers “interest on interest” income. This means that investors earn compounding returns on the initial investments, resulting in exponential growth in portfolio value.

How Does a Compounding Interest Calculator Work?

The best compound interest calculator works on the principle of the compounding return formula. It includes the calculation of the future value of a principal amount based on an interest rate for a given period of time. Refer to the compound interest formula calculator below to understand the concept better:

A = p(1+r/n)^nt

Here, 

a/A = Amount

p/P = Principal amount 

r/R = rate of interest

n/N = number of times the interest compounds 

t/T = investment tenure (in years)

The above formula illustrates how the best compound interest calculator works. To understand the compound interest calculator in-depth, read the example below.

How to Calculate Compound Interest?

Use the compound interest calculator formula, A = p(1+r/n)^nt, to calculate the potential interest on your investments. To know more about compound interest calculation, refer to the example below.

Mehak has decided to start an investment scheme for the long term. She has decided to invest an amount of ₹ 1,00,000 for 5 years at an expected compound interest rate of 10%. Under the scheme, the interest will be compounded annually (once a year).

Using the online compound interest calculator, we can calculate the future value of Mehak’s investment based on the inputs given above.

Inputs for the Compound Interest Calculator

Initial investment (p) = ₹ 1,00,000 

Investment tenure (t) = 5 years 

Compounding frequency (n) = annually 

Interest rate (r) = 10 %

Outputs for the Compound Interest Calculator

Compound interest (A) = ₹ 61,051

Principal (p) = ₹ 1,00,000

Total investment value = ₹ 1,61,051

Explanation: The above calculation explains that Mehak accumulated a corpus of ₹ 1,61,051 on an initial investment of ₹ 1,00,000 within 5 years. Mehak has earned a compound interest rate of 61.1% over her investment tenure.

What is the Univest Compound Interest Calculator?

Univest compound interest calculator is an advanced online financial calculator. It offers you great features that let you estimate your compound return on your principal investment.

The compound interest formula calculator lets you calculate your return based on your varied investment needs.  From 1 year to 30 years, this compound interest calculator in India is suitable for all types of investors, from short-term to long-term.

Benefits of Using Univest Compound Interest Calculator?

• Long-term planning
  Using the best compound interest calculator in India, you can estimate the future value of a principal amount for a period ranging from 1 year to 30 years. It offers you the benefit of calculating your return for a long-term tenure, leading to comprehensive investment planning.
• Investment Comparison
  This compound interest calculator lets you compare various investment options based on the depicted returns. This calculator can assess the feasibility of various investment scenarios as per changing inputs.
• Graphical Representation
  The compound interest calculator in India presents data in the form of numeric values along with graphics. It leads to an easy understanding and interpretation of the results given by the calculator.
• Easy Interface
  To make it accessible and easy to use, the compound interest formula calculator has been developed with a user-friendly interface. Thus, investors with little knowledge of markets can also conveniently understand the calculator's workings.
• Time-Saving
  The best compound interest calculator by Univest offers you the convenience of estimating your ROI easily and quickly. It enables you to save a lot of time in your investment journey.
• Accurate Estimation
  Our compound interest calculator has been curated to estimate accurate returns for your target investment goals. This can assist you in creating a robust portfolio, leading to a financially secure future.

How to Use Univest Compound Interest Calculator?

To use the compound interest calculator, you must follow the steps below:

Steps to Access the Univest Compound Interest Calculator

Step 1 - Open your search browser and enter Univest in the search bar.

Step 2 - On the homepage, click on the explore button at the top.

                Then, choose the calculator option.

Step 3 - You will find the compound interest calculator on the resultant webpage.

Steps to Use Univest Compound Interest Calculator

Step 1 - Insert the investment amount, return rate, and tenure on the compound interest calculator webpage. 

Step 2 - Analyse your projected investment plan and returns through the pie chart and bar graphs for better       understanding. 

Step 3 - You can also change the inputs in the compound interest calculator as per your requirements to derive estimated returns and investment value.

Mistakes to Avoid in Compound Interest Calculator

• Overreliance on a calculator
  You should not rely on the results of the online compound interest calculator to create an investment strategy or plan. These results are only future value projections and should not be misinterpreted as a guarantee.
• Not sticking to a plan or strategy
  Before using the best compound interest calculator in India, you must have a well-structured investment plan. It is essential to keep yourself focused and use the calculator efficiently as part of your investing strategy.
• Ignoring inflation and other costs
  The returns shown by a compound interest formula calculator do not include inflation and other investing costs. Hence, ensure you factor in the inflation rate and other transaction costs while calculating your net returns based on the compound interest calculator.

Simple Interest V/S Compound Interest

Compound and simple interest are two of the most common terms used in the BFSI sector. These terms signify the amount of interest investors can earn on their investments over a specific period. However, they differ significantly based on various factors. Learn more about simple and compound interest based on the information below:

Compound Interest Meaning, Formula, Application & Complexity of calculation

Compound Interest Meaning:- Refers to the interest earned on the total value of the initial investment and accumulated interest.

Compound Interest Formula:- A = p(1+r/n)^nt

Compound Interest Application:- Loans, investments,  pension funds

Complexity of Compound Interest calculation:- Highly complex

Simple Interest Meaning, Formula, Application & Complexity of calculation

Simple Interest Meaning:- Refers to the interest earned on the principal or original value of the investment only.

Simple Interest Formula:- SI = (P x R x T)/100

Simple Interest Application:- saving accounts, personal loans, and FDs

Complexity of Simple Interest calculation:- Straightforward and easy

How is Simple Interest Calculated?

Compared to compound interest calculation, simple interest can be calculated using a relatively simple formula.

Simple Interest Formula = (P x R x T)/100

Here, 

P = principal amount

R = rate of interest

T = time in years

As you can see from the above example, calculating simple interest is quite an easy task compared to calculating compound interest. Therefore, you must use the best compound interest calculator in India to estimate your compounded interest to avoid any possible mistakes and complexities.

How Does Compounding Work?

"Compound interest is the eighth wonder of the world. He who understands it, earns it...he who doesn't...pays it. - Albert Einstein. 

The above statement summarises the essence and importance of compounding in today's economy. Compounding means receiving returns on a particular investment based on the original investment amount and previously earned interest. Have a look at the example below to understand it better.

Suppose you have invested ₹10,000 in an instrument for 2 years at a 10% interest, which is compounded annually. So, the return that you will receive on this investment would be as follows:

At the start of the year 1

Principal (A):- ₹ 10,000

Interest @ 10% (B):- ₹1000

Final value at the end of the year (A+B):- ₹11,000

At the start of the 2nd year

Principal (A):- ₹11,000

Interest @ 10% (B):- ₹1,100

Final value at the end of the year (A+B):- ₹12,100

Explanation: From the above example, we can see how the principal investment of ₹ 10,000 became ₹12,100 at the end of the 2nd year. It happened because at the start of the first year, interest was calculated on the original investment of ₹10,000.

However, for the second year, interest was calculated on the amount of ₹ 11,000 (₹10,000 principal + ₹1000 interest). Hence, the increase in the base value in the 2nd year led to an exponential growth in the final value of our investment. In the final calculation, we can derive that the original return rate was 10%, but the actual interest earned during the 2-year tenure was 12.1%, which indicates the multiplying power of compounding.

Conclusion

• An online compound interest calculator is a freely available financial tool. It is used to calculate the estimated compound interest on invested capital. 
• The best compound interest calculator in India assists investors in quickly projecting returns on investment based on a compounded interest formula.  
• Compound interest refers to the compounding return earned on investments. It is also known as the “interest on interest” income. 
• Simple interest refers to the interest income earned only on the principal amount invested. 
• Simple interest formula: (P x R x T)/100
• Compound interest formula: A = p(1+r/n)^nt