Interest Only Loan Calculator
Calculate your interest-only loan payments and see a detailed breakdown
Loan Summary
Once the interest-only period ends, your payments will increase to include both principal and interest.
Introduction: Interest Only Loan Calculator
If you owe on an interest only loan, it is crucial to learn how much of your monthly payment goes toward interest. Our Interest Only Loan Calculator does all the work for you! Whether you’re dealing with a mortgage, business loan, or investment property, the tool lets you see where your money is really going so that you can plan smarter.
What Is an Interest Only Loan Calculator? (Beginner-Friendly Explanation)
An interest-only loan is a borrowing in which you pay only the interest for the first few years, typically to be followed by higher payments that cover not only the interest but also the principal. As opposed to a standard amortizing loan, you are not paying the principal during the interest-only term.
Some of the more typical uses for these loans include:
- Mortgages: usually for borrowers who seek lower first payments
- Investment Properties: for optimizing immediate cash flow
- Business loans (for those businesses that need flexibility in the early days)
Understanding how to calculate interest only loan payments is an important part of managing your finances and preventing surprises later on.
Why Use an Interest Only Loan Calculator
Understand Your Monthly Interest Payments
To determine interest factors by manual methods requires a lot of time and is subject to error. A calculator tells you down to the penny how much you will owe each month, so there are no surprises.
Compare Loan Scenarios Easily
You can experiment with various interest rates, loan terms, and principal amounts. That can be useful when you are considering refinancing or sticking with your current loan.
Avoid Costly Surprises
When the interest-only period concludes, your payments will go up because you will then be paying both principal and interest. A tool is helping you brace for it now.
How to Calculate Interest on Interest Only Loan (Step-by-Step Guide)
Using the formula above, you could try to determine your monthly interest payment yourself:
Monthly Interest Pay = (Loan Amount × Annual Interest Rate)/ 12
Example:
- Loan amount: $250,000
- Annual interest rate: 6%
Monthly Interest = (250,000 × 0.06) ÷ 12 = $1,250
This means, if we do the math for a $250,000 loan at 6% interest, you would be paying $1,250 a month for that time period on an interest-only basis.
Doing the math yourself can do the trick, but it can be cumbersome if you have more than one loan or want to test out scenarios. This is where our interest only loan payoff calculator comes in handy.
How Our Interest Only Loan Payoff Calculator Works
Simple, User-Friendly Interface
You simply input the loan amount, interest rate, term length and any additional payments you’d like to make.
Instant Results
The calculator shows:
- Monthly interest-only payment
- Total amount of interest paid over the interest-only term
- An estimate of future payments when the principal is repaid
Advanced Features
- You can then add extra payments to see how they will affect the total interest you end up owing.
- Compare up to 3 loan scenarios side by side.
- Works perfectly on your desktop and mobile device.
Benefits of Using an Online Interest Only Loan Calculator
Saves Time and Effort
No need for manual calculations. Seconds later, you have results in seconds.
Helps Plan for Principal Repayment
Find out how steeply your payments will jump once the interest-only period is over.
Ideal for REITs & Borrowers
If you are buying a rental property or have an interest-only mortgage, this calculator will help you keep afloat.
Free, and Updated for 2025
Our calculator runs on the latest formulas and financial standards.
Interest Only Loan vs. Traditional Loan: Key Differences
| Feature | Interest-Only Loan | Traditional Amortizing Loan |
| Monthly Payment (Initial) | Lower | Higher |
| Principal Reduction | None during interest-only period | Principal reduces from the start |
| Total Interest Paid | Higher overall if principal is not reduced early | Lower over the life of the loan |
| Payment Shock | Yes, after interest-only period ends | No major payment jump |
Common Mistakes to Avoid with Interest Only Loans
Ignoring Principal Paydown
If you don’t make payments toward the principal, you could owe essentially the same amount a few years down the road.
Underestimating Future Balloon Payments
The new payments can be far higher when the interest-only term ends.
Forgetting to Compare Total Costs
Occasionally, a more traditional amortizing loan could wind up being less expensive over time.
Expert Tips for Paying Off an Interest Only Loan Faster
Make Small Principal Payments Monthly
Put more toward the loan and you’ll lower the balance overall and save on interest.
Apply Windfalls or Bonuses to Principal
Put any extra cash you receive toward your loan principal.
Refinance at the Right Time
If rates decline, you can save money and pay off the loan faster with refinancing.
Conclusion: Interest Only Loan Calculator – Plan Smarter, Borrow Better
Interest-only loans are a valuable tool if you think ahead. Check out our Interest Only Loan Calculator to see your payments, track your interest costs, and consider options for the future. The more you know about your loan, the better your financial decisions will be.
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FAQ: Interest Only Loan Calculator
What is an interest-only loan?
It’s a loan on which you make interest payments only for a predetermined time frame, rather than paying it down with the principal.
How do I figure out the interest on an interest-only loan?
Multiply your loan balance by the annual interest rate, then divide by 12 for monthly amount.
Is an interest-only loan ever a good idea?
It depends on your goals. They have lower payments at the beginning, though they can end up costing more long-term.
What about when the interest-only period is over?
Your payments rise because you are beginning to repay the principal.
Can I pay more money than due on an interest-only loan?
Yes, and it will lower your overall interest.
Is an interest only loan cheaper in the long run?
Not usually. You often pay more in interest unless you prepay some of the principal.
What is the best Interest Only loan repayment calculator online?
Our Interest Only Loan Calculator is accurate, free and has been updated for 2025, so it’s one of the best available.
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