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Interest Only Loan Calculator
See the low interest only payment and the higher payment once your loan starts to amortize, plus the total interest you will pay. Enter your numbers and press Calculate.
Written by TopicDrill Editorial Team·Updated June 2026
Remaining balance over time
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How an interest only loan works
An interest only loan has two phases. During the interest only period you pay just the interest on the balance, so your payment is low and the amount you owe stays flat. The dashed line in the chart marks the point where that period ends.
After that, the loan amortizes. You start repaying principal alongside interest over the remaining term, so the balance finally falls and the payment rises. Because the principal now has fewer years to be repaid, the new payment is noticeably higher than a standard loan of the same total length.
A quick example
Borrow $300,000 at 6.5% with a 10 year interest only period on a 30 year term. The interest only payment is about $1,625 a month. Once amortization begins, the payment rises to roughly $2,237 a month to clear the balance over the final 20 years.
Things to keep in mind
The low early payment is tempting, but you build no equity during the interest only period and pay more interest overall. For guidance on loan shopping, see the Consumer Financial Protection Bureau. To compare with a standard loan, try our mortgage calculator.
Frequently asked questions
How does an interest only loan work?
For a set period you pay only the interest, so the balance does not fall. After that period the loan amortizes over the remaining term, and the payment jumps because you now repay the principal as well as interest. This calculator shows both payment levels.
Why is the payment higher after the interest only period?
Because the full principal is repaid over a shorter window. If a 30 year loan has a 10 year interest only period, the principal is amortized over the remaining 20 years instead of 30, which raises each monthly payment.
Do interest only loans cost more overall?
Usually yes. Since the balance stays high during the interest only period, you pay interest on the full amount for longer. The calculator reports total interest so you can compare it against a standard amortizing loan.
Who uses interest only loans?
They appeal to borrowers who want lower payments early on, such as people expecting higher income later or investors managing cash flow. They carry more risk because the balance does not drop until amortization begins, so use them carefully.
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