Interest rates are the life-blood of banking and financial institutions, just as how taxes are to the government. It is through charging an interest that a bank or credit institution earn income. While an interest creates a burden upon the people, for the aforementioned reason, the practice has been widely accepted socially and legally. People need not worry though because through a bank interest calculator, they now have a solution to the problem of having to pay too much than what they can actually afford.
A bank interest calculator is a mechanism that allows a person to compute the actual and probable interest rate that he is required to pay growing out of an incurred monetary obligation. Calculating bank interest may be done manually or automatically when a person utilizes a bank interest calculator online.
There are various kinds of bank interest calculator to correspond with the different types of interest rate. To illustrate this, there is a bank interest calculator that computes interest incurred in lending or borrowing money, investments on assets, bonds, etc., and savings deposit. The most common type of bank interest calculator is one that computes a loan interest, which may be a simple or compound interest.
A bank interest calculator for simple interest merely multiplies the principal amount by the interest rate, which is the basic form of an interest. The given interest rate may correspond to a daily, monthly, or annual rate, depending on the schedule agreed upon by the lender and borrower.
On the other hand, a bank interest calculator for compound interest computes the accumulated interest on the principal plus the unpaid interest thereon. In a compound interest, the simple interest is added to the principal amount and the sum becomes the new principal amount upon which the same or different interest rate is based.
The process repeats itself until the corresponding payments are made. Like the simple interest rate, a compound interest may also be based on a daily, monthly or annual schedule. This type of interest is more complex, which requires a greater need for the use of a bank interest calculator.
Using a bank interest calculator has several benefits. One, as mentioned above, it helps a person determine his ability to pay existing or future obligations, depending on the availability of funds.
Two, a bank interest rate calculator is very easy to use as one just inputs the pertinent data, which the calculator automatically computes based on pre-programmed functions and formula. Simply put, a person need not be a math whiz or a financial expert for him to know how to compute the interest rate. A third advantage is that the bank interest calculator takes the time and effort off a person who would normally have to go see a financial advisor or a bank representative for consultation. With an interest calculator, one need not employ a financial consultant in the first place.