• Home
  • Economics
    • Scarcity
    • Opportunity Cost
    • Goods and services
    • Market and economic systems
    • Economy
    • Production
    • Factors of production
    • Production function
    • Equilibrium
    • Economies of scale
    • Economies of scope
    • Efficiency
    • Productivity
    • Comparative advantage
  • Microeconomics
    • Utility
    • Supply and demand
    • Elasticity
    • Economic surplus
    • Consumer surplus
    • Producer surplus
    • Market failure
    • Market structure
  • Macroeconomics
    • GDP
    • Economics GDP Formula
    • GNP Formula
    • NDP
    • National income
    • Disposable income
    • Aggregate demand
    • Aggregate supply
    • Unemployment
    • Inflation
    • Interest rate
    • Business cycle
    • Central bank
    • Investment
  • Guest Post
Monday, July 14, 2025
  • Login
EconGuru
  • Business
    • All
    • Accounting
    • Entrepreneurship
    • Management
    • Marketing
    • MBA
    Guest Experiences at hotel

    Exceeding Expectations: How Offering Unique Guest Experiences Can Drive Hotel Revenue

    Understanding Performance Reporting for Your Company

    Easy Ways to Ramp Up Security for Your Small Business

    3 Things You Should Know Before You Start a Web Design Firm

    5 Ways to Make Money When You Are Disabled

    5 Business Ideas You Can Run From Anywhere In The World

    5 Best Books to Learn Stocks Trading: Study for Successful Investing

    6 Best Real Estate Books to Get You a Solid Education In Real Estate Investing

    Must-Read 5 Best Business Books For Men And Women Who Love Success!

  • Economics
    • All
    • Basic Economic Concepts
    • Economic Data
    • Economic Mathematics
    • Economics Diagrams
    • Economics Education and Careers
    • Environmental Economics
    • International Economics
    • Macroeconomics
    • Microeconomics
    Crypto Fomo and Panic Selling

    Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

    bitcoin trading

    How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

    this image describes bear vs bull market.

    Bull vs. Bear Market: 8 Key Indicators to Watch in Crypto Markets

    How to Study for an Economics Exam

    Top 100 Dataset Websites & Sources for 2021

    “Capital in the Twenty-First Century” – a comprehensive master piece on world Economy and the reign of inequality

    Freakonomics: a book for unconventional thinkers and practical millenial economist

    Is the Study of Economics Truly a Science?

    What is Your Contribution to National Income?

    Trending Tags

    • Finance
      • All
      • Basic Financial Concepts
      • Corporate Finance
      • Personal Finance
      Crypto Fomo and Panic Selling

      Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

      bitcoin trading

      How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

      this image describes bear vs bull market.

      Bull vs. Bear Market: 8 Key Indicators to Watch in Crypto Markets

      decentralised finance defi

      10 Best Tips for Choosing the Right DeFi Platform

      bitcoin

      5 Factors That Affect Bitcoin Prices and Volatility in the Financial Markets

      corporate event speaker

      How To Attract Industry Experts To Speak At Your Next Corporate Event

      Best 4 Personal Finance Software on Amazon

      The best invoicing softwares for small businesses

      5 Best Invoicing Software for Small Businesses

      Cryptocurrency: In Light of the Increased Volatility, Is It Worth the Risk?

      Trending Tags

      • Insurance
      • Investing
      • World
        • Markets & Industries
        • Public Economics & Finance
      No Result
      View All Result
      Write for Us
      EconGuru
      • Business
        • All
        • Accounting
        • Entrepreneurship
        • Management
        • Marketing
        • MBA
        Guest Experiences at hotel

        Exceeding Expectations: How Offering Unique Guest Experiences Can Drive Hotel Revenue

        Understanding Performance Reporting for Your Company

        Easy Ways to Ramp Up Security for Your Small Business

        3 Things You Should Know Before You Start a Web Design Firm

        5 Ways to Make Money When You Are Disabled

        5 Business Ideas You Can Run From Anywhere In The World

        5 Best Books to Learn Stocks Trading: Study for Successful Investing

        6 Best Real Estate Books to Get You a Solid Education In Real Estate Investing

        Must-Read 5 Best Business Books For Men And Women Who Love Success!

      • Economics
        • All
        • Basic Economic Concepts
        • Economic Data
        • Economic Mathematics
        • Economics Diagrams
        • Economics Education and Careers
        • Environmental Economics
        • International Economics
        • Macroeconomics
        • Microeconomics
        Crypto Fomo and Panic Selling

        Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

        bitcoin trading

        How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

        this image describes bear vs bull market.

        Bull vs. Bear Market: 8 Key Indicators to Watch in Crypto Markets

        How to Study for an Economics Exam

        Top 100 Dataset Websites & Sources for 2021

        “Capital in the Twenty-First Century” – a comprehensive master piece on world Economy and the reign of inequality

        Freakonomics: a book for unconventional thinkers and practical millenial economist

        Is the Study of Economics Truly a Science?

        What is Your Contribution to National Income?

        Trending Tags

        • Finance
          • All
          • Basic Financial Concepts
          • Corporate Finance
          • Personal Finance
          Crypto Fomo and Panic Selling

          Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

          bitcoin trading

          How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

          this image describes bear vs bull market.

          Bull vs. Bear Market: 8 Key Indicators to Watch in Crypto Markets

          decentralised finance defi

          10 Best Tips for Choosing the Right DeFi Platform

          bitcoin

          5 Factors That Affect Bitcoin Prices and Volatility in the Financial Markets

          corporate event speaker

          How To Attract Industry Experts To Speak At Your Next Corporate Event

          Best 4 Personal Finance Software on Amazon

          The best invoicing softwares for small businesses

          5 Best Invoicing Software for Small Businesses

          Cryptocurrency: In Light of the Increased Volatility, Is It Worth the Risk?

          Trending Tags

          • Insurance
          • Investing
          • World
            • Markets & Industries
            • Public Economics & Finance
          No Result
          View All Result
          EconGuru
          No Result
          View All Result

          Home Index Finance Basic Financial Concepts What is Compound Interest?

          What is Compound Interest?

          Anthony Carter by Anthony Carter
          June 10, 2011
          in Basic Financial Concepts
          0 0
          A A
          0
          Share on FacebookShare on TwitterShare on LinkedinShare on RedditShare on WhatsappShare by Email

          Whenever a person takes out a loan, secures finance for a venture or refinances an asset, there is always a clause regarding the interest that the principal amount will accrue during the finance period. When the interest on the primary account is accrued and then added to the primary amount before the next interest is calculated, you are dealing with compound interest – In other words interest on interest. You are no longer working with just the primary amount and random interest. You’re dealing with an amount of money that is added to the primary fund and is then used as the basis of the next interest calculation.

          Because one has to pay interest to borrow money, money depreciates over time, thus having different present value and future value.

          You might also like

          Crypto Fomo and Panic Selling

          Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

          January 9, 2025
          bitcoin trading

          How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

          December 23, 2024

          Uses

          This form of interest calculation is often used where people need long-term loans or large amounts of finance. It is one sure way for banks and other financial institutions to make more money than they give out. The compounded interest can also lead to longer terms of payment to accommodate the larger sums of money that have to be paid back. This is usually the case when you’re looking at mortgages and cash loans.

          Dealing with Compounded Interest

          Before you enter into any financial agreement, you need to be absolutely sure what kind of interest you are being charged. Static interest is better as you can predict how much the interest will be every month. If you’re charged compounded interest you will need to calculate how much you will need to pay so that you also pay part of your capital amount off and not just the interest on the money that you’re paying back. If you are only paying the interest, it can take you quite a while before you’ve paid back the loan.

          Banks do very complicated calculations to include the compounded interest into the final amount payable. They will therefore tell you what the final amount is that is being financed. You then agree to pay the higher amount (which includes the interest) off over a set period of time (e.g. 2 years etc.). Should you default on the payments, new interest will be added to your account and a new amount for finance will be calculated.

          Understanding how compounded interest works is one of the most important steps that you can take in securing a loan or any other type of finance. If you have the formulas that the financing companies use, you will also be able to calculate beforehand what your interest repayments will be when you borrow the money.

          Should you try and get finance via the internet, it is possible to use the finance calculators that the companies make available on their websites to assist you with your calculations.

          Conclusion

          When dealing with compounded interest, you need to make sure that you pay as little interest as possible. Negotiate a favorable percentage and stick to the repayment agreements. The last thing that you want is for further interest to be charged on your already hefty financial burden.

          Tags: compound interestcompounded interestfinance periodfinancial institutions
          Previous Post

          What is Selective Distribution?

          Next Post

          Top 5 Best Business Writing Books Reviewed

          Anthony Carter

          Anthony Carter

          Anthony Carter currently resides in Fife, Scotland with his wife Lisa, and their three wonderful children. As a senior editor for various publications, if he's not reading and writing, you would find him photographing and traveling to some of the most far-flung locations around the world.

          Related Stories

          Crypto Fomo and Panic Selling

          Avoiding Crypto FOMO and Panic Selling: Emotional Control in Crypto Investing

          by Heather Sloan
          January 9, 2025
          0

          Have you ever been a victim of crypto FOMO? Ever rushed to buy cryptocurrency because others were doing the same,...

          bitcoin trading

          How to Trade Bitcoin with Only $100 for Beginners: A Complete Guide

          by Heather Sloan
          December 23, 2024
          0

          Can you start Bitcoin trading with as little as 100 dollars?" Yes! And here is how you do it!  Most...

          this image describes bear vs bull market.

          Bull vs. Bear Market: 8 Key Indicators to Watch in Crypto Markets

          by Heather Sloan
          December 1, 2024
          0

          In the investment world, markets act as battlefields between the divinely powerful opportunities of bulls and bears. While a bear...

          decentralised finance defi

          10 Best Tips for Choosing the Right DeFi Platform

          by Heather Sloan
          December 1, 2024
          0

          10 Best Tips for Choosing the Right DeFi Platform Decentralized Finance (DeFi) transforms how humans manage their finances today by...

          Next Post

          Top 5 Best Business Writing Books Reviewed

          What is EconGuru?

          EconGuru

          EconGuru was founded in 2006 by a group of Economics students who are passionate about learning and sharing everything in Economics, Finance, and Business.

          The mission is to improve economic and financial literacy of the general public so people can better understand and react to economic problems and make good financial decisions.

          We have no social profiles on any network, and if you like us, bookmark EconGuru.com or share us with your friends.

          Textbooks

          • Intro to Economics
          • Firms & Industrial Structure
          • Fundamentals of Ecology
          • Economics
          • Macroeconomics
          • Microeconomics
          • Useful Links

          © 2006 - 2022 EconGuru - Your premium guide for Economics, Finance, and Business. Privacy

          Welcome Back!

          Login to your account below

          Forgotten Password?

          Retrieve your password

          Please enter your username or email address to reset your password.

          Log In
          No Result
          View All Result
          Write for Us
          • Banking
          • Books & Textbooks
          • Business
            • Accounting
            • Entrepreneurship
            • Management
            • Marketing
            • MBA
          • EconGuru
          • Economics
            • Concepts
            • Microeconomics
            • Macroeconomics
            • Economic Data
            • Economic Mathematics
            • Economics Diagrams
            • Education and Careers
            • Environmental Economics
            • International Economics
          • Finance
            • Concepts
            • Corporate Finance
            • Personal Finance
          • History of Economics
            • Economists
          • Insurance
          • Investing
          • Markets & Industries
          • Public Economics & Finance
          • World Economy
          • Login

          © 2006 - 2022 EconGuru - Your premium guide for Economics, Finance, and Business. Privacy

          Are you sure want to unlock this post?
          Unlock left : 0
          Are you sure want to cancel subscription?