Interest-Only Loan Calculator
During an interest-only period you pay only the interest, so the balance does not fall. When the period ends, the payment rises because you must repay the principal over the remaining term. Enter your figures to see both payments and the total interest.
Interest-Only Loan Calculator
How this calculator works
An interest-only loan lets you pay just the interest for an initial period. Because none of the payment goes to principal, the balance stays the same and the interest charge does not fall. That keeps the payment low while the period lasts, but it also means no equity builds up and the full principal remains to be repaid afterwards.
When the interest-only period ends, the loan is re-amortised over the remaining term. The payment jumps because the same balance must now be cleared in fewer months. This tool calculates the interest-only payment as the balance times the monthly rate, then computes the post-period payment with the standard amortisation formula over the months that remain.
The total interest is the interest paid during the interest-only period plus the interest paid during the amortising period. The tool uses only your inputs and assumes a fixed rate throughout. If the rate adjusts, both payments and the total interest will change.
Frequently asked questions
Why does the payment rise so much after the IO period?
Because the principal was not reduced during the interest-only period, so the full balance must be repaid over the remaining months. A shorter remaining term means a larger payment.
Does an interest-only loan build equity?
No, not from payments. The balance stays the same unless you pay extra or the property value rises. Equity only grows if you make principal payments or the underlying asset appreciates.
What happens at the end of the interest-only period?
The loan converts to an amortising payment over the remaining term, or in some cases a balloon payment becomes due. This calculator models the amortising case, which is the more common structure.
Is an interest-only loan more expensive overall?
Usually yes, because the balance stays high for longer and interest accrues on it. The total interest row shows how much more you pay compared with repaying principal from the start.
Can I pay extra during the interest-only period?
Often yes, and doing so reduces the balance and therefore the interest charge. It also lowers the payment after the period ends. Check your agreement for any restrictions.
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