What interest only means
On an interest only loan you pay only the interest, so the balance does not fall and the whole amount is due at the end as a balloon payment. The monthly payment is the loan times the yearly rate, divided by 12. On $25,000 at 8% that is $166.67 a month, or $2,000.00 a year.
After 5 years you still owe $25,000.00, and the interest has come to $10,000.00. A fully amortizing loan on the same terms costs $506.91 a month and pays the balance off, but the interest only loan costs $4,585.41 more in interest over the term.
Interest on $10,000 at 21.52%
The mortgagecalculator.org interest only table uses $10,000 at 21.52% as its example, and shows $2,152 a year. This calculator gives $2,152.00 a year, or $179.33 a month.
Fees change the APR
An origination fee and closing costs raise the cost beyond the interest. A 2% origination fee and $200 of closing costs, deducted from the loan, make the total charge $10,700.00 and the APR with fees 8.69%, against an 8% note rate.
Interest only first, then repayments
You can pay interest only for part of the term. Interest only for 2 years of a 5 year loan costs $166.67 a month. After that, repaying the balance over the remaining 3 years costs $783.41 a month, and the total interest is $7,202.73.
For a normal amortizing loan with a budget and other terms, use the secured loan calculator.
Plan for the balloon
A balloon payment has to come from savings, a sale or a refinance. If you cannot refinance, the lender can take the security. Check whether your lender allows interest only on a secured loan and what happens at the end.
For the UK product, open the UK interest only secured loan calculator.
Inputs for the interest only secured loan calculator
Amount to borrow
The loan amount you are applying for.
Loan term
How long the whole loan runs, including the interest only period.
Interest-only period
How long you pay only interest. Make it the full term to repay everything in one lump.
Interest rate
The yearly note rate on your offer, charged monthly at one twelfth. The 8% shown is only an example.
Origination fee
A percentage of the loan from your offer. Enter zero if there is none.
Closing and other fees
Fixed costs from your offer, in dollars.
Fees are
Whether fees are deducted from the loan, added to it or paid in cash.
Value of the security
What the savings, certificate, vehicle or home securing the loan is worth.
CALCULATOR QUESTIONS
US interest only secured loan calculator questions
How is interest only calculated?
The loan times the yearly rate, divided by 12. On $25,000 at 8% it is $166.67 a month.
What is a balloon payment?
The whole balance due at the end of an interest only loan: $25,000.00 on the example.
Does interest only cost more?
Over the whole term, yes: $4,585.41 more on the example, because the balance is never paid down.
Can I pay interest only for part of the term?
Yes. Set the interest only period shorter than the term and the calculator shows the payment that follows.
What is the APR with fees?
The nominal yearly rate on the cash you receive, with the fees counted. It is 8.69% for a 2% origination fee and $200 of closing costs.