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Power of Compounding Calculator: Use our compound interest calculator to see how your money, investment or pension can grow using the power of compounding.
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Compound Interest Calculator Compound calculatorentails earning interest on your investment over time, leading to an increase in your earnings. The power of compounding allows your earnings to grow alongside your investments. To grasp this concept better, consider this: interest is added to the initial investment (principal amount), forming compound interest. As this interest accumulates onto the principal, subsequent interest calculations are based on this augmented amount, fostering continuous growth throughout the investment period. Similarly, the investment calculator operates on the same principle as the compound interest calculator, aiding in computing returns on investments effortlessly. Additionally, to determine your retirement corpus, utilize the retirement calculator, while the pension calculator assists in assessing pension requirements.
What is Compound Interest? The interest on a loan or deposit calculated based on the initial principal, and the collective interest from previous periods is called compound interest. It is basically 'interest earned on money that was previously earned as interest'. This allows your sum and interest to grow at a faster rate compared to the simple interest which is calculated only on the principal amount. The rate at which compound interest accumulates interest depends on the frequency - higher the number of compounding periods, higher will be the compound interest. For instance, if you earn a 10% annual interest, a deposit of Rs 100 would gain you Rs 10 after a year. What happens the following year? That’s where the compound interest comes in. You’ll earn interest on your deposit, and you will also earn interest on the interest you just earned. The longer you leave your money untouched, the greater it will grow because compound interest grows over time which means your money keeps on multiplying over a period of time. If you are repaying a loan on compound interest, you should not ignore paying the interest or if there is any delay in paying the loan, then the interest burden will be high. To take advantage of compounding, one must aim at increasing their frequency of loan payments. This way you can pay less interest than what you are liable to pay.
How does Compound Interest Work ? If you make a sound investment, compound interest can help you to build your wealth over time. But if your debt is subjected to compound interest, then it can cause financial hardship if not planned. To understand how compound interest works, let us break down the process of how your investment can compound better. Compound Interest starts when your investment earns interest. At this point, the interest is added to the initial investment amount. When it earns interest again, it will determine the newly earned interest by calculating the initial capital invested and the earned interest. As the size of the investment continues to grow, it will earn interest to the total investment amount. This loop will continue allowing the investment to grow substantially without any additional investment capital. With time, this cycle has potential for a substantial growth of the original investment.
