Interest Only Loan Calculator

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.
• Interest only loan formula shows the monthly interest only payment math and where it shows up.
• Interest only vs amortizing loan compares the two payment styles and what happens after the interest only period.
• APR vs interest rate explains why APR can be higher than the interest rate and which number to use when comparing loans.
• How to calculate loan interest walks through simple interest, interest only, and amortizing interest math in one place.
• All money calculators.