Finance Calculators - Bahi Khata

How is Interest Calculated?

Here's a simple breakdown of how this calculator works behind the scenes.

📅 Step 1 – Duration is based on your dates

When you pick a From Date and a To Date, the calculator counts the exact number of days in between and uses that as the loan/investment period.

Example: From 1 Jan 2024 to 1 Jan 2025 = 366 days

📊 Step 2 – Interest Rate (Monthly or Yearly?)

You can enter the rate as a monthly rate (e.g. 2% per month) or a yearly rate (e.g. 24% per year). Both give the same result — the calculator converts monthly to yearly automatically.

Example: 2% per month = 24% per year

🔹 No Compounding – Simple Interest

If you select No Compounding, interest is added only on the original amount — not on the interest itself. Think of it as a flat charge on the principal for the entire duration.

Example: ₹1,00,000 at 24% per year for 1 year
→ Interest = ₹24,000 | Total = ₹1,24,000

🔁 With Compounding – Interest on Interest

If you select a compounding frequency, the interest is added to your principal at the end of each period. From then on, you earn (or owe) interest on the new higher amount. This means the total grows faster over time.

Example: ₹1,00,000 at 24% per year, compounded every month for 1 year
→ Interest ≈ ₹26,824 | Total ≈ ₹1,26,824
(₹2,824 more than simple interest — because interest was added monthly)

⏱ Compounding Frequencies Explained

The more frequently interest is compounded, the slightly higher the total interest will be.

Compounding	How often interest is added
No Compounding	Never — flat interest on original amount only
1 Month	Every month (12 times a year)
3 Months	Every quarter (4 times a year)
6 Months	Twice a year
1 Year	Once a year
2 Years	Once every two years

💡 Quick tip: For most informal loans, "No Compounding" with a monthly rate is the most common setup. Compounding is more typical for bank FDs and long-term investments.

Interest Calculator