Interest that is periodically added to a principal sum, resulting in a new principal balance which then triggers a new interest assessment.
Unpaid interest added to the principal of a loan, increasing both the loan principal and monthly payments.
The frequency with which interest and fees are computed and added to the principal balance. If the promissory note indicates that interest will be compounded, the lender will, at stated intervals, capitalize the accrued interest.
Compounded interest is the interest that you earn on a deposit or investment that uses compounding. Banks and financial institutions routinely use compounding to pay you a higher interest rate. For example, a bank may be offering a CD that pays interest at 10%. If the bank does not compound interest, you will receive 10% of your investment as interest income at the end of a year. But if the bank compounds interest every three months, you will earn an interest rate of 10.38%. If the bank compounds interest monthly, you will earn 10.47%. And if it compounds daily, you will earn 10.52%. For a $10,000 deposit, this is an extra $52 in interest that you earn.
Interest that is added to the loan principal and becomes subject to additional interest charges.. Back to the top
Interest that is added to interest previously earned on a principal balance. Compounding increases the rate of return on a depositor's bank balance.
A loan term that is considered interest on interest. The borrower pays interest earned on principal plus interest that was earned earlier. If you are borrowing, try to get a loan that charges simple interest. If you are investing, try to invest at an institution that pays you compounded interest.
The frequency with which interest is computed and added to the principal to arrive at a new balance.
Interest computed on the principal plus the interest accumulated previously to the date of compounding.
Interest that is computed and added to the principal to arrive at a new balance. If the promissory note indicates that the interest will be compounded, the lender will assess interest at stated intervals. The first time this is done, the interest rate will be computed on the original principal. The sum of this first interest amount and the original principal becomes the new amount on which the next interest assessment is made. Given the same rate of interest and the same original principal for the same length of time, a borrower will pay back more if compounded interest is charged.
Interest that is added to the loan principal and becomes subject to additional interest charges. See Capitalization of Interest.
Interest that is paid on both the principal balance of the loan and on any accrued (unpaid) interest. Capitalizing the interest on an unsubsidized Stafford loan is a form of compounding.
Interest is computed on the principal balance of a mortgage plus accrued interest.