Interest Only Loan
An interest only loan is a loan in which the borrower makes periodic payments that cover the interest on the outstanding balance. At the end of the loan the principal is paid off in one lump sum .
To see the amortization schedule, select the Show Details command in the Calculation menu.
To toggle between date and year/period view, click the first column header in the Details.
To change the start date, select the Start Date command in the Edit menu to open the Date Options dialog.
Input
| • nominal annual rate |
| • compounding frequency |
| • payment frequency |
| • number of years or payments |
| • loan amount |
Results
| • periodic payment |
| • effective periodic rate |
| • total paid |
| • total interest |
Examples
| • | A debt of $10,000 with interest at 6 % compounded monthly is paid off using equal monthly payments covering the periodic interest over the next ten years, the first payment due in one month. At the end of the loan the principal is paid off in one lump sum. What will be the total interest charge for this interest only loan?
Answer: $6,000. |
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| • | Using the same data, what would be the total interest charge for a standard loan? Just switch to the Installment Loan calculation and look up the Total interest result. Answer: $3,322.46 or 45 % less. |
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| • | Using the same data, what would be the total interest charge for a fixed principal loan? Just switch to the Fixed Principal Loan calculation and look up the Total interest result. Answer: $3,025 or about 50 % less. |
Related topics
| Nominal annual rate |
| Compound interest |
| Loan Amortization |
| Rule of 78 Amortization |
| Balloon Payment Loan |
| Fixed Principal Loan |
| Sinking Fund Loan |
| Prepaid Interest Loan |
| Extra Principal Payments Loan |