Interest Only Loan Calculator

Interest Only Loan Definition

A common loan option that many people are exploring these days is that of what is known as an interest-only loan. These are loans in which the borrower begins by paying just the accrued interest on the overall principal balance. During this time, the principal balance remains the same. After the interest-only period has ended, the borrower can explore a number of options, including that of beginning to pay down the principal balance with a traditional loan or even converting the entire balance into an amortized loan. Options will vary depending on the lender and the purpose for which the loan will be used.

Use Our Calculator

With our interest only loan calculator, you can determine exactly how much you will be paying on interest on your interest-only loan each month. From there, you can have a better idea as to what your payments will be during the interest-only phase of your loan. Depending on how high or low these payments are, you may even wish to seek an interest-only loan term with a lower interest rate if possible.

To use our calculator successfully, you only need to input two pieces of information:

1. The total amount to be financed by the lender.
2. The interest rate percentage that you were offered.

Using the Information

Upon entering this information, simply hit the “calculate” button to receive the total amount of interest that you will be paying on the car each month. Keep in mind that this amount is separate from the funds that will go towards your principal balance. Upon completion of the interest-only term of your loan, you may wish to begin paying down the principal balance so that you can gradually get your debt paid off in a reasonable period of time. You may also wish to explore other options.

If the amount seems too high, explore other financing options to see if you can get approved for a lower interest rate.

Consider the benefits and disadvantages to using an interest-only loan before you decide to use one; while starting with interest-only payments can be nice, it could ultimately lengthen the amount of time required to pay off your loan.

How to Calculate Interest Only Loan

Let's be honest - sometimes the best interest only loan calculator is the one that is easy to use and doesn't require us to even know what the interest only loan formula is in the first place! But if you want to know the exact formula for calculating interest only loan then please check out the "Formula" box above.

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