A simple calculator that calculates the amount accrued plus interest payments.
|Where: P = A / (1 + rt)|
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The term interest is very commonly used in the finance world. We have all heard the term at some point or another and most of you may know that calculating simple interest is the basis for all your financial needs. Interest calculation is important for both investments and lending.
Interest differs from many other kinds of benefits that a financial institution or an investor receives, such as fee, which is paid for the processing or a loan or a third party commission, dividends or profits earned on shareholdings as they are considered the reward for risk taking.
Borrowers pay interest on loan payments, the payment goes towards the particular month and the remaining balance goes towards the principal. The interest never accumulates as it is paid in full every period of the term.
Let's understand it with an example, we will use USD (United States Dollars) as an example currency: Consider a personal loan with a principal amount of $50,000 and 5% annual interest rate. If your loan schedule reflects the first payment of 1 October, your bank will calculate interest for the 30 days of September, that is $205.48. This is calculated by dividing the total interest rate by 365 (days in a year) and then multiplying the results with 30 (days in a month).
There are many factors that can affect interest, such as taxes, economy and political gains. Let's take a brief look at the factors that affect the interest rate the most:
Interest rates are different for various products, for example a borrower will get a lower interest rate on the auto loan, because of the collateral value of the automobile that is being financed. Controversially, the interest rate on a personal loan will be comparatively higher because the risk involved due to the absence of a collateral value.
This is the other important factor that affects the rate of interest. When you lend money, the prices of goods and services may go up by the time you are paid back, this will effectively decrease the purchasing power. The possibility of higher inflation can cause the interest rate to rise.
The calculator designed by iCalculator lets you choose an option from the dropdown list, which shows you the following four options:
The simple interest plus principal calculator simplifies your calculations in many ways. You can use it to determine the interest amount for any frequency of time, it can be, daily, weekly, monthly, quarterly and yearly interest, so you may see the actual amount that you are paying against the loan. Also, several banks offer to take the interest only for the portion of day you use the facility. For example, if you pay the installment 10 days before the due date on a monthly installment loan, you might save the interest for those 10 days. You can find out the actual amount you may save with the help of the calculator.
And, above all, the calculator can be used in four different ways, which means you can find out the total amount, interest rate, period and principal amount by just entering the data for the other 3 options. You may use the results obtained from the calculator to compare the rates offered by various banks and pick an option that works best for you, or perhaps shop around for better options.
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