Amortization Table: Interest-Only Loan Calculator

An interest-only amortization table shows each payment and the interest charged while the principal balance stays unchanged during the interest-only period. Enter the loan amount, APR, and term below to estimate the monthly interest-only payment and total interest across the stated term; this calculator assumes interest-only payments for the entire term.

Formula

For an interest-only loan with a fixed balance, the periodic payment covers the interest accrued for that period and does not pay down principal. The monthly calculation is:

• Monthly payment = P × (APR ÷ 100 ÷ 12)
• Total interest over the term = monthly payment × number of monthly payments

P is the starting principal in dollars; APR is the annual percentage rate entered as a percentage; and the number of payments is the loan term in years × 12. The APR is divided by 100 to convert a percentage to a decimal, then divided by 12 for the monthly rate. The calculator’s total interest uses the displayed monthly payment rounded to cents, so it is an estimate based on that rounded amount.

Worked Example

Using the calculator’s default inputs—$20,000 principal, 8% APR, and a five-year term:

1. Convert APR to a monthly rate: 8 ÷ 100 ÷ 12 = 0.0066667, or about 0.66667% per month.
2. Calculate monthly interest: $20,000 × 0.0066667 = $133.333…, which rounds to $133.33 per month.
3. Calculate the number of payments: 5 × 12 = 60 months.
4. Multiply the rounded monthly payment by the payment count: $133.33 × 60 = $7,999.80 total interest.

The principal balance remains $20,000 throughout the example. If the agreement requires the principal to be repaid at the end, the final amount due would include that $20,000 principal in addition to any final-period interest. This calculator reports interest only, not that principal repayment.

Assumptions

• The interest rate is fixed for the full period entered.
• Payments are monthly and made at the end of each monthly interest period; there are 12 periods per year.
• Interest is calculated using a monthly rate equal to APR divided by 12, with no principal reduction during the modeled term.
• Fees, taxes, insurance, escrow, rate changes, late charges, and payment-date variations are not included.
• The model assumes an interest-only payment is due each month for the whole term; it does not model a later transition to principal-and-interest payments.

What an Interest-Only Amortization Table Shows

A conventional amortization table tracks how each scheduled payment is split between interest and principal. With a standard fixed-payment loan, early payments often include more interest, while later payments reduce principal more quickly. An interest-only schedule is different: while the interest-only arrangement remains in effect, the principal portion of each regular payment is zero.

A typical schedule may include the payment number or date, opening balance, interest due, principal paid, total payment, and closing balance. In a pure interest-only period with a steady rate, the opening and closing balance are the same each month. The interest charge is also the same each period when the payment timing and rate remain unchanged. If the rate can change, future interest charges can change even if the principal does not.

“Interest-only” describes how scheduled payments are applied during a specified period; it does not mean the borrowed principal disappears. Depending on the contract, the borrower may later make principal-and-interest payments, pay a larger amount when the interest-only period ends, or repay principal through another arrangement. Check the loan documents for the payment structure and the date or event that ends the interest-only period.

How to Read the Calculator Result

The monthly result is the estimated interest charge for one month under the assumptions above. The total-interest result multiplies that monthly amount by all months in the entered term. Neither result is the total amount repaid if principal is also due: add the unpaid principal separately to understand the amount that would be owed at the end under a balloon or principal-repayment structure.

For example, the default calculation produces $7,999.80 in scheduled interest across five years, but it does not say the loan is fully paid off. If the full $20,000 principal remains outstanding, interest plus principal would amount to $27,999.80 across the modeled payments and principal repayment, before any excluded costs. The actual payoff amount may also depend on the contract’s dates, rounding, fees, rate changes, and final-payment calculation.

Interest-Only Versus Regular Amortization

On a fully amortizing loan, each scheduled payment generally covers interest and pays some principal, with the balance reaching zero after the planned number of payments if the terms are followed and the rate and payment structure remain as modeled. On an interest-only loan, regular payments during the specified period cover interest without reducing principal. That usually means a lower scheduled payment during that period than a comparable principal-and-interest payment on the same balance and rate, but the principal remains to be repaid.

Because this page models interest-only payments for the entire entered term, it is not a complete schedule for a loan that switches to amortizing payments after an introductory period. To evaluate that later stage, the remaining balance at the transition and the new payment terms are needed. A single interest-only estimate cannot represent a changing rate, a changing payment, or a principal repayment plan.

Common Mistakes and Limits

• Treating interest as principal repayment: Paying the monthly interest does not reduce the balance in this model.
• Confusing APR with a monthly rate: Enter the annual percentage, such as 8 for 8%, not 0.08 and not 8% divided by 12. The calculator performs the conversion.
• Assuming the final balance is zero: The model leaves the starting principal outstanding. It does not calculate a payoff schedule for that principal.
• Ignoring changes in terms: Variable rates, payment frequency other than monthly, partial principal payments, fees, and a later amortization phase are outside the formula.
• Overlooking rounding: Actual servicing calculations may use more precise daily or periodic accrual and a differently sized final payment. A displayed estimate rounded to cents may therefore differ slightly.

The formula is a simplified estimate for equal monthly interest periods. Loan contracts can define interest accrual and payment timing differently, so use the loan’s disclosed schedule for exact amounts and dates.

Frequently Asked Questions

Does an interest-only amortization table reduce the loan balance?
No. During the modeled interest-only period, scheduled payments cover interest and the principal balance stays unchanged unless a separate principal payment is made.

How do you calculate a monthly interest-only payment?
Multiply the principal by the monthly interest rate. For an APR quoted annually as a percentage, the monthly rate in this estimate is APR ÷ 100 ÷ 12.

Is the total interest the total amount I repay?
No. Total interest excludes the unpaid principal. If principal remains due, it must be repaid separately under the contract.

What happens when an interest-only period ends?
The contract determines the next payment structure. Payments may begin covering principal and interest, or another repayment may be due. Review the agreement for the transition date, balance, and required payment.

Can this calculator model a variable-rate or partial interest-only loan?
No. It assumes the entered APR remains fixed and that every payment in the term is interest-only. A changing rate or a later principal-and-interest phase needs additional inputs and calculations.

This result is an estimate for education, and the lender’s disclosure gives the exact figures.

Related

• Qualifying Income Test: Calculate Income Coverage
• Qualifying Income for SNAP Benefits Explained
• Qualifying Income for Self Assessment Explained

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly interest-only payment | $ | p * (apr / 1200) | 2
out int | Total interest | $ | pmt * yrs * 12 | 2