Interest-Only Loan Calculator: Payments & Balloon

 

Estimate interest-only monthly payments at a fixed annual rate, then see the principal still due at the end. Paying only interest does not reduce your loan balance. This model assumes the full principal is repaid as a lump sum with the last monthly interest payment.

Use a period for decimals and no thousands separators. The annual rate is a nominal interest rate, not APR including fees. All amounts use the same currency; figures are shown to two decimal places.

JavaScript is required for interactive calculations. Formulas and examples remain available below.

How to calculate an interest-only payment

Monthly interest = loan amount x (annual interest rate / 100) / 12. Round that amount to the nearest cent for this model. Total interest = rounded monthly interest x number of months. The principal remains unchanged throughout the period.

Total paid including principal = total interest + original loan amount. Final payment = principal + one monthly interest payment. This assumes regular monthly payments, no extra principal repayments and no unpaid interest added to the balance.

Worked example

Enter Loan amount 250000, Annual interest rate (%) 6.5 and Interest-only period (months) 60. Select Calculate interest-only loan. The monthly interest is 250000 x 0.065 / 12 = 1354.166666..., rounded to 1354.17.

Total interest is 1354.17 x 60 = 81250.20. Principal balloon due at the end is 250000.00. Final payment including last month's interest is 251354.17, while total paid including principal is 331250.20. That total comprises 59 regular payments and the combined final payment.

A lower monthly payment does not repay principal

An interest-only payment can be lower than an amortizing payment because it does not include scheduled principal repayment. The outstanding principal still needs a repayment plan. Refinancing or selling an asset at the end is not guaranteed to cover the balance.

Some loans switch to amortizing payments after an initial interest-only period instead of requiring an immediate balloon. This calculator does not model that later phase, future payment resets or affordability. Check the actual repayment schedule in the loan agreement.

Rate and rounding assumptions

The calculation uses a fixed nominal annual rate divided by 12. It does not use daily interest, actual-day counts, an effective annual rate or an APR that includes fees. Monthly interest is rounded half up to two decimal places before being multiplied by the number of months. A lender that retains accrued fractions or adjusts the final interest charge can produce a different total.

At zero interest, monthly interest and total interest are zero, but the full principal is still due. Very small positive rates may also round to a zero monthly payment; the result flags this case. Taxes, insurance, origination fees, late fees, variable rates and early repayment charges are excluded.

Inputs and related calculations

Loan amount must be greater than zero up to 1000000000, with at most two decimal places. Annual interest rate must be 0 to 100 percent, with at most four decimal places. The interest-only period must be 1 to 600 whole months. These are software limits, not lending eligibility rules. All money figures assume a currency with two decimal places.

For a loan that repays principal through regular installments, use the Mortgage Payment Calculator. Compare the full repayment structure and charges rather than only the first monthly payment.

For a step-by-step walkthrough, read How to Calculate Interest-Only Loan Payments and the Final Balloon.

Privacy

Calculations run locally in your browser. This calculator does not save or transmit your loan entries. The hosting website may use separate analytics or advertising services.

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