Interest Only Loan Calculator
What is an interest-only loan?
An interest-only loan is a loan in which the borrower pays only the interest due during a defined period, usually the first few years of the term. During this period, the principal balance does not decrease. The borrower pays only the interest that accrues on the principal.
The Calculator-Calculate a Interest Only Payment Schedule
Information
About the calculator and other interest-only loan details
Additional instructions for the interest-only loan calculator
- Loan Amount: Enter the total amount of the loan. Enter a numeric value (for example, 100000), with or without decimals.
- Payment Amount: Enter the amount of each payment. Enter a numeric value (for example, 2500), with or without decimals. If you do not know the payment amount, enter 0 and the calculator will compute it from the other inputs.
Note: Enter one of the two values above and leave the other as 0. The calculator will solve for the unknown value.
- Number of Payments: Enter the number of interest-only payments you will make.
- Annual Interest Rate: Enter the annual interest rate as a percentage (for example, 5%).
- Payment Frequency: Select how often payments are made, such as monthly, weekly, bi-weekly, or quarterly.
- Compounding: Select how often interest is compounded. If you do not know this value, set it to the same frequency as the payments.
What are the potential benefits of an interest-only loan?
The Accurate Interest-Only Loan Calculator creates a payment schedule that has payment amounts equal to the periodic interest. You may use this calculator for loans that have an initial series of interest-only payments.
During the interest-only period, required payments are lower because the borrower pays only interest. Lower payments can help manage cash flow and may appeal to borrowers who expect income to increase or whose income varies.
What are the risks of an interest-only loan?
A primary risk is the payment increase that occurs after the interest-only period ends and principal repayment begins. The higher payment can create financial strain and may lead to default if the borrower cannot afford it.
Another risk is that the borrower may owe the same amount that was originally borrowed—or more—because the principal does not decline during the interest-only period.
Interest-only loans are often used for investment properties or when a borrower expects to sell or refinance before principal payments start. Borrowers should evaluate their finances and goals carefully and be sure they understand all terms and risks before choosing this type of loan.
Interest Only Loan Calculator Help
With interest-only loans, each periodic payment covers only the interest due for that period. Because no principal is repaid, the scheduled payments are smaller until the final payment. The final payment includes the entire principal balance. When a borrower selects an interest-only loan, the loan balance does not decline.
Note: Bonds represent debt—a loan to the issuer. Many bonds pay only periodic coupon interest, so they are interest-only loans.
This calculator can solve for one of two unknowns: “Amount of Loan” or “Periodic Payment.”
Enter 0 for the value you want the calculator to compute.
The term (duration) of the loan depends on the “Number of Payments” and the “Payment Frequency.” If payments are monthly and the term is four years, enter 48 for “Number of Payments.” If payments are quarterly and the term is ten years, enter 40.
For most loans, set the “Payment Method” to “Arrears.” This means the funds are disbursed first, and the initial payment is due one period later.
If the first payment is due on the day the funds are available, set “Payment Method” to “Advance.” This is common with leases.
AINGRAM@PORTERWRIGHT.COM says:
I am clicking Schedule after inputting data and the schedule is not appearing.
Karl says:
I tried it just now, and I don’t see an issue.
Is there a box with an error message below the calculator?
Can you provide me with your inputs so that I can try your calculation?
Ian J Rayner says:
I printed a loan summary. All the details are correct with the exception that I want to change the loan date to a date for years earlier rather than December 1, 2023. Please advise how I do this. And I also want to record the payment was made towards the end of the term
please advise
Karl says:
Please use this generic loan calculator and set the amortization method to "Interest-Only". You can set the dates on the option tab.
Willie says:
How can I imput this loan and show payment schedule?
50,000 loan
5,500 (11%)
90 day term 3 months
Monthly interest only payments $1833.33
1st month $1833.33
2nd month $1833.33
3rd month $1833.33 + 50,000.01
Total repayment $55,500
Karl says:
Please use the Ultimate Financial Calculator. It gives the user complete control over the cash flows.
There are a number of tutorial, including one on interest-only series.
If after reviewing the tutorials, you have a question, please ask.
Michael M says:
Great WP Plug-in
Would like the interest only calculator for WP.
Would like to remove some fields (fixed values in backend)
Only want Loan Amount, Interest to shown and editable.
Only want Payment and Total interest to be returned.
Karl says:
Thank you. But what you are looking at is not a plugin.
I could convert it to a plugin. Of course, that would be a custom project.
If you are interested in discussing this further, please contact me via the email address on the contact page.