Interest-only loan calculator
During an interest-only period you pay just the interest, so the balance stays the same. Enter the amount, rate, interest-only period and total term to see the low payment now, the larger payment when repayment begins and the total interest. If the interest-only period lasts the whole term, the full amount is due at the end.
Runs in your browser: nothing you enter is sent anywhere.
How to use it
- Enter the loan amount and the yearly interest rate.
- Enter the interest-only period and the total term, both in years.
- Read the low payment, the payment afterwards and the total interest.
How it works
- Interest-only payment = amount × rate ÷ 12.
- After the period, the full amount is repaid over the remaining months with the annuity formula P × r ÷ (1 − (1 + r)^−n).
- Total interest = interest-only payments + (later payments × months − amount).
Worked example
Borrow 120,000 at 6% for 10 years, interest-only for the whole term. You pay 120,000 × 0.005 = 600.00 a month for 120 months, which is 72,000.00 of interest, and 120,000.00 is due at the end, so 192,000.00 in total.
Tips
- Plan for the jump. Check you can afford the higher payment, not just the interest-only one.
- Fees and rate changes are not included.
- Compare with a normal loan using the loan calculator to see the extra interest.
Frequently asked questions
How is the interest-only payment calculated?
Payment = amount × annual rate ÷ 12. For 300,000 at 6%, that is 300,000 × 0.005 = 1,500 a month. None of it reduces the balance.
What happens when the interest-only period ends?
The full original amount is then repaid over the remaining months in equal payments, so the payment rises. For 300,000 at 6% with 5 years interest-only in a 30-year term, it goes from 1,500 to about 1,932.90.
What if the interest-only period equals the whole term?
Then you only ever pay interest and the whole principal is due as one lump sum at the end, shown as the principal due. You would need to repay or refinance it.
Is an interest-only loan cheaper?
The payment is lower at first, but you pay more interest in total than on a fully amortizing loan with the same term, because the balance does not fall during the interest-only period.
Does this work for adjustable rates?
No. It assumes one fixed rate for the whole term. If your rate changes, the payment after a change will differ.