When to use this calculator
Use this to understand the interest portion of a simple interest-only loan, keeping the separate repayment of principal in view.
Explore the loan & repayment calculators for other questions in this topic. For a related calculation, use the Loan Affordability Calculator: Find the loan principal supported by a chosen fixed monthly payment.
PUTTING IT INTO PRACTICE
Interest Only Loan: a worked example
The values below are an illustrative example, not a recommendation. Replace them with measurements or assumptions that match your question.
| Input | Example value |
|---|---|
| Loan principal | 100,000 |
| Nominal annual rate (%) | 6 |
| Result | 500 per month |
- Check the input labels and enter the example values above.
- Apply the relationship: Monthly interest = principal × annual rate/1200.
- The result is 500 per month, rounded for display.
How to interpret your result
The original principal remains due and is not paid off by these interest payments.
Use a fixed-rate amortising model for loans repaid by equal monthly instalments. An interest-only payment leaves the principal outstanding. Fees and contractual APR calculations require more than the interest rate alone.
Frequently asked questions
Does a lower monthly payment mean a cheaper loan?
Not necessarily. Extending the term can lower payments while increasing total interest. Compare both monthly affordability and overall cost.
When is the interest only loan calculator useful?
Use this to understand the interest portion of a simple interest-only loan, keeping the separate repayment of principal in view.
How do I use the interest only loan calculator?
Enter loan principal, nominal annual rate (%). The result updates automatically. Use the units shown beside each input; the example values illustrate the method.
Which formula does this calculator use?
Monthly interest = principal × annual rate/1200.
What should I check before using the result?
The original principal remains due and is not paid off by these interest payments.
How are results rounded?
Scalar numbers display up to six decimal places, with scientific notation for very large or small values. Text, fraction, date and schedule outputs use the format described on the tool. Intermediate calculations use JavaScript floating-point arithmetic. Keep sensible precision for your measurements.
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