Money
Interest Only Loan Calculator
Run the interest only payment math three ways: find the interest only payment for any loan amount and rate, total the interest paid over a fixed interest only period, or compare an interest only payment against the standard amortizing payment on the same loan.
Mode
The principal balance of the loan. · e.g. 250,000
The nominal annual rate. · e.g. 7
Payment frequency
Monthly payment
$1,458.33
$250,000.00 loan at 7%
On a $250,000.00 loan at 7%, the interest only monthly payment is $1,458.33. Annual interest is $17,500.00 (about $47.95 per day). Interest only payments do not reduce the principal.
Interest only payments cover the interest only. The principal balance does not decrease while interest only payments are in effect.
Examples
$250,000 at 7% interest only monthly
≈ $1,458.33 / month
$500,000 at 6% interest only monthly
= $2,500 / month
$250,000 at 7%, 5-year IO period
≈ $87,500 total interest, $250k principal remains
$250,000 at 7%, 30-year term, 5 IO years
IO $1,458.33 vs amortizing ≈ $1,663.26
How it works
An interest only payment covers just the interest charge, not the principal. The math is the same in every period until the rate or balance changes:
Monthly interest only payment
monthly = principal × annual rate / 12
Biweekly and weekly
- biweekly = principal × annual rate / 26
- weekly = principal × annual rate / 52
Annual and daily interest
- annual interest = principal × annual rate
- daily interest ≈ annual interest / 365
Standard amortizing payment (for comparison)
M = P × r(1 + r)^n / ((1 + r)^n − 1)
where r is the monthly rate (annual / 12) and n is the total months.
The interest only payment does not include principal. After the interest only period ends, the same principal is still owed.
What this calculator does
The interest only loan calculator handles the three questions that come up most often when an interest only structure is on the table:
- Interest only payment: what is the per-period interest payment on a given loan amount and rate? Pick monthly, biweekly, or weekly.
- Interest only period total: how much total interest is paid during a fixed interest only window, and what principal remains at the end of it?
- Compare interest only vs amortizing: side by side, with the per-month difference and the total interest only payments over the IO period.
How the calculator works
Pick a mode and enter the loan inputs:
- Interest only payment: principal, annual interest rate, payment frequency. The calculator divides the annual interest by the number of payment periods per year (12, 26, or 52).
- Interest only period total: adds an interest only period in years. The calculator multiplies the per-period payment by the total number of payments in the window and shows the principal still owed at the end (unchanged from the start).
- Compare mode: adds a loan term in years. The calculator computes the standard amortizing monthly payment using M = P × r(1+r)^n / ((1+r)^n − 1) and reports the per-month difference and the total interest only payments over the IO window.
Interest only vs amortizing
An amortizing payment combines interest and a slice of principal in every period, so the balance falls to zero by the end of the loan term. An interest only payment only covers the interest, which keeps the per-period payment lower but leaves the principal unchanged.
Example: a $250,000 loan at 7%.
- Interest only monthly payment: $250,000 × 7% / 12 ≈ $1,458.33.
- Standard amortizing monthly payment over 30 years: about $1,663.26.
- Difference per month: about $204.93. Over a 5-year interest only period, the borrower would pay about $87,500 in interest with no principal reduction; the full $250,000 would still be owed at the end of the interest only window.
For pure amortizing loan math, see the loan calculator. For mortgage-specific math (principal, interest, taxes, insurance, PMI, HOA), see the mortgage calculator. For the underlying principal-rate-time arithmetic behind interest only payments, see the simple interest calculator.
What happens after the interest only period
When the interest only window ends, most loans handle the principal in one of three ways:
- Switch to amortizing payments on the remaining balance over the remaining term. Because the principal is being repaid in a shorter window, the new monthly payment is usually higher than a straight amortizing payment that started from day one. This calculator's compare mode shows the day-one amortizing payment for reference; the step-up payment after the interest only period is usually higher.
- Balloon payment of the entire principal at the end of the interest only window. Common in some commercial and bridge loans.
- Refinance into a new loan with new terms. Subject to the lender's approval and the rates available at the time.
The right path depends on the loan agreement, the lender, and the borrower's situation at the time the interest only window ends. The calculator does not decide which path applies; it only does the math.
Worked examples
- Interest only payment, $250,000 at 7% monthly: $250,000 × 0.07 / 12 ≈ $1,458.33.
- $500,000 at 6% monthly: $500,000 × 0.06 / 12 = $2,500 per month.
- $100,000 at 8% biweekly: $100,000 × 0.08 / 26 ≈ $307.69 per biweekly period.
- Interest only period, $250,000 at 7%, 5 years monthly: 60 payments at about $1,458.33 = about $87,500 in total interest; principal remaining ${250,000}.
- Compare, $250,000 at 7% over a 30-year term: interest only monthly $1,458.33; amortizing monthly $1,663.26; difference about $204.93/month.
Common mistakes
- Treating an interest only payment as the long-term cost. The payment is lower, but the principal stays flat. Over the full term, total interest on an interest only structure can be substantially higher than on a straight amortizing loan at the same rate.
- Forgetting the step-up after the interest only window. When the loan converts to amortizing, the new monthly payment is usually higher than what a day-one amortizing payment would have been on the same loan.
- Comparing interest only and amortizing payments at different rates without normalizing. Real interest-only loan offers sometimes come with a slightly higher rate than the amortizing alternative; compare like-for-like.
- Treating this calculator as a quote. It is math only. Real loan terms include fees, escrow, taxes, insurance, balloon clauses, and lender-specific rules that change the all-in cost.
- Forgetting that the principal still needs to be repaid. An interest only window delays principal repayment; it does not eliminate it.
Related tools
- Loan calculator for straight amortizing loans (personal, student, auto, or any fixed-rate installment).
- Mortgage calculator for home loan payment estimates including taxes, insurance, PMI, and HOA.
- Simple interest calculator for the basic principal-rate-time math underlying the per-period interest calculation here.
- Future value calculator for the textbook FV formulas on the lender's side of the same transaction.
- Savings calculator for setting aside money to cover the step-up payment when an interest only window ends.
- All money calculators.
Estimate only, not financial advice. This calculator estimates the math behind an interest only payment and a comparable amortizing payment. Real loan terms, fees, escrow, taxes, insurance, adjustable rates, lender rules, and balloon payments can vary. No rate or payment shown here is guaranteed by any lender. For decisions that meaningfully affect a payment, refer to the loan documents and a qualified professional.
Frequently asked questions
An interest only loan is one where the borrower pays only the interest charge during an initial period. The principal balance stays the same during that period. After the interest only window ends, the loan either switches to amortizing payments that include principal, requires a balloon payment, or is refinanced. The math in this calculator covers the interest only portion only.
For a monthly interest only payment: monthly payment = principal × annual rate / 12. For biweekly: principal × annual rate / 26. For weekly: principal × annual rate / 52. There is no principal reduction during the interest only period, so the payment is the same every period until the rate or balance changes.
No. Interest only payments cover the interest charge only. The principal balance stays flat for the full interest only period. After the interest only period ends, the same principal is still owed and either needs to be repaid through amortizing payments going forward, a balloon payment, or a refinance.
Lower monthly cash flow during the interest only period, which can be useful for income that grows over time, a planned short hold, or matching the payment to a specific budget. The trade-off is that no equity is built during the interest only period and total interest paid over the life of the loan is usually higher than on a straight amortizing loan.
An amortizing payment is a fixed amount that pays both interest and a slice of principal every period, so the balance gradually drops to zero by the end of the term. An interest only payment only covers the interest, so the balance stays flat. Use the Compare mode in this calculator to see both side by side on the same loan.
Most loans either switch to amortizing payments on the remaining balance (now over a shorter remaining term, which usually means a higher monthly payment), require a balloon payment of the full principal, or get refinanced into a new loan. The exact behavior depends on the specific loan agreement.
Yes, for the interest portion. It calculates the monthly, biweekly, or weekly interest payment on a stated balance and rate, and can compare to a standard amortizing payment. It does not handle property taxes, homeowners insurance, PMI, HOA dues, escrow, or any of the other components that show up on a real mortgage statement. For full mortgage payment estimates, see the mortgage calculator.
No. The annual rate input is the nominal interest rate only. Real loans often include origination fees, points, prepayment penalties, balloon clauses, escrow, taxes, insurance, and other costs that change the all-in cost of borrowing. Use the lender's disclosure for those.
Smaller, more frequent payments mean a smaller dollar amount per payment but the same annual interest total. Monthly is annual rate / 12 per payment, biweekly is annual rate / 26 per payment, and weekly is annual rate / 52. The annual interest charge is the same; only the per-payment dollar amount changes.
No. It is a math tool. Real loan terms, fees, escrow, taxes, insurance, adjustable rates, lender rules, and balloon payments can vary. The calculator does not call any rate or payment guaranteed, and does not weigh in on whether an interest only structure is right for a specific situation. For decisions that meaningfully affect a payment, refer to the loan documents and talk with a qualified professional.
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