# Interest Only Loan Calculator

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## Interest only loan calculator help...

As the name states, with interest only loans, the periodic payment amount pays only the interest due for the period. Of course, paying only interest results in smaller periodic payments until the final payment is due. The final payment includes the entire principal amount. When a consumer selects an interest only loan, they are not paying down the loan's balance.

Note: Bonds represent debt, that is a loan to the bond's issuer. Frequently bonds pay only coupon interest, and thus they are interest only loans.

This calculator will solve for either one of two possible unknowns: "Amount of Loan" or the "Periodic Payment."

Enter a '0' (zero) for one unknown value.

The term (duration) of the loan is a function of the "Number of Payments" and the "Payment Frequency." If the loan is calling for monthly payments and the term is four years, then enter 48 for the "Number of Payments." If the payments are made quarterly, and the term is ten years, then enter 40 for the "Number of Payments."

Normally you would set the "Payment Method" to "Arrears" for a loan. This means that the monies are lent on one day, and the first payment isn't due until one period after the funds are received.

If the first payment is due on the day the funds are available, then set "Payment Method" to "Advance." This is typical for leases.

## Pia says:

Is there a way to change the loan date?

## Karl says:

Thank you for asking. Not with this calculator. However, with our

amortization tablethere is.Note, you’ll need to select “interest only” using the “amortization method” drop down.

If you ever have a debt which has some interest only payments followed by regular payments, the Ultimate Financial Calculator will handle those cases.

## JC says:

Hi

I want to make sure that I am using this calculator right, trying to solve for the payment amount. If I have a loan amount of say $100,000, 9 year loan with a 2% interest rate compounded semi-annually, where interest is paid annually, this is what I put in:

Loan amount $100,000

Number of Payments=18

Annual interest rate =2%

Payment frequency = annually

Compounding – semi-annually

Payment method – arrears

## Karl says:

Hi, thanks for the question. Your setup is almost right. You said it’s a 9 year loan with annual payments, so you should enter 9 for the number of payments rather than 18. However, that’s not going to make a difference in the calculated payment amount because the payments are for interest only. So assuming that the payments are made as schedule it does not matter if the term of the loan is 1 year, 9 years or 100 years, the payment amount will be the same – $2,010.00. (2% on $100,000 is $2,000 of course. The $10 is due to the semi annual compounding.)

## John says:

Hi:

We have the potential of investors loaning money for a fixed period at a fixed rate (simple interest). Example: Pay simple interest monthly for 12 months on a loan of $5,000. Is this the right calculator to use? Also, it appears this a very simple thing to do in Excel, right?

Thanks.

## Karl says:

If you need to create a schedule of future, interest only payments showing when they are due with a final payment of principal and interest, then yes, this is the calculator to use.

If you want to track the payments as they are made and calculate the actual interest amount due, allowing for payments that are not necessarily made on the date due, then you should use the Ultimate Financial Calculator. Scroll down the page and see tutorial number 25, after you’ve looked at tutorial 1.

## Jackie says:

Is there a calculator that would allow me to compute an interest only loan, prepayments allowed, compounded daily on remaining balance. I would like to input periodic principal prepayment.

## Karl says:

Yes, there certainly is. The Ultimate Financial Calculator.

Scroll down the page and you’ll see a number of tutorials. Please read tutorial #1 for an overview and then there is a tutorial for interest only series. Use the extra payment option so that the payment is applied to principal. This calculator will allow you to record a payment on any date. Once you’ve tried it if you have any questions just ask.

## Nick Nedzweckas says:

Hello,

I am trying to figure out what the purchase price would be for a loan after 5 years with the following costs and interest rates.

12 year APR 5.99% 18 month interest only loan. Payments for 1st 18 months $357.37 and then $766.88 after that. If I buy out the system at month 60, how much would that be?

Thank you,

Nick

## Karl says:

This is not the correct calculator for what you want. Please use the Ultimate Financial Calculator. Scroll down that page and you’ll find a number of tutorials. Read #1 to get you started.

There is also a tutorial about setting up an interest only series. Once you’ve looked at those, if you have questions, please ask them on that page.

Also, it’s not clear to me when you say "purchace price" if you are after the loan balance after five years.