Monthly Interest Calculator: Plan Your Passive Income & Debt
In personal finance, the "Monthly Calculation" is often the most practical one. We pay bills monthly, we receive salaries monthly, and we often need our investments to pay us monthly. The **Monthly Interest Calculator** is designed to bridge the gap between annual interest rates (which banks quote) and monthly cash flow (which you need).
Whether you are a retiree looking at the **Post Office Monthly Income Scheme (POMIS)**, an investor planning a **Systematic Withdrawal Plan (SWP)**, or a borrower trying to understand why your **Credit Card** debt is spiraling, this tool gives you the exact numbers. It allows you to toggle between Simple Interest (Fixed Payouts) and Compound Interest (Growth).
The Math: Annual to Monthly Conversion
Most financial institutions quote the **Annual Percentage Rate (APR)**. To find the monthly impact, the math changes based on the type of interest.
1. The Simple Interest Method (Fixed Deposits/MIS)
Example: ₹10 Lakhs at 7.2% p.a. gives (10,00,000 × 7.2) ÷ 1200 = ₹6,000 per month.
2. The Compound Interest Method (Loans/Credit Cards)
Interest for Month 1 = Principal × r
Note: In compounding, the interest earned in Month 1 is added to the Principal for Month 2, creating a snowball effect.
Passive Income: The Monthly Payout Strategy
One of the most popular uses of this calculator is to plan for a steady stream of income. Here are the most common avenues in India:
| Scheme | Type | Best For |
|---|---|---|
| Post Office MIS | Fixed Simple Interest | Retirees, Risk-averse investors |
| Bank FD (Monthly Payout) | Fixed Simple Interest | Short term income necessity |
| Corporate Deposits | Higher Fixed Interest | Investors seeking higher yield |
| Senior Citizen Savings Scheme | Quarterly Payout (Convertible) | Retired Seniors (>60 years) |
The "Credit Card Trap" Calculation
On the flip side, this calculator is vital for borrowers. Credit card companies quote monthly interest rates like "3.5% pm". This sounds small, but let's do the math.
- Nominal Rate: 3.5% × 12 = 42% per annum.
- Effective Rate (Compounding): Due to monthly compounding, the effective rate is actually (1 + 0.035)^12 - 1 = 51.1%.
Warning: Use the "Compound Interest" mode in this calculator to check your credit card debt. You will likely find the numbers shocking.
How to Interpret the Results
Total Monthly Income
If you are an investor, this figure tells you how much cash hits your bank account every month without touching your principal amount.
Total Interest Paid
If you are a borrower, this figure separates the "cost of the loan" from the actual repayment. It helps you see how much money is "wasted" on interest.
Frequently Asked Questions
Why is the monthly interest not exactly Annual Rate / 12?
In **Compound Interest**, the monthly rate is applied to an increasing balance. In **Simple Interest**, it IS exactly Annual Rate / 12. Make sure you select the correct mode based on your financial product.
Does this calculator support Days?
This specific tool is optimized for monthly cycles. However, you can enter fractional months (e.g., 1.5 months) to get an estimate for 45 days.
Can I use this for Home Loans?
You can use it to check the *interest component* of a specific month, but Home Loans have a reducing principal. For a full schedule, please use our **Loan EMI Calculator** which calculates the principal repayment as well.
Is Monthly Interest taxable?
Yes, in almost all cases (FDs, MIS, Savings), interest income is added to your total income and taxed as per your slab rates. TDS may also be deducted by the bank if the interest exceeds limits (e.g., ₹40,000 p.a.).