Interest-Only Loan Calculator
Calculate payments for an interest-only loan period and compare total cost against a fully amortising loan.
During the interest-only phase you pay interest only — principal stays unchanged. Higher amortising EMI kicks in after.
Phase 1 — Interest Only (5yr)
Phase 2 — Amortising (20yr)
Interest-only loans allow borrowers to pay only the interest portion for an initial period — keeping monthly payments very low — after which they switch to fully amortising payments covering both principal and interest. This product is common in property investment, construction loans, and some corporate lending. While attractive for short-term cash flow management, interest-only periods always result in a higher total cost compared to a standard amortising loan because the principal does not reduce during the initial phase.
📋 How to Use This Calculator
Enter the loan amount, interest rate, the duration of the interest-only period in years, and the subsequent amortising repayment period in years. The calculator shows the low interest-only monthly payment, the higher EMI after the IO period ends (since the full principal must now be amortised in a shorter period), total cost of the loan, and the comparison with a standard EMI on the same loan for the combined period. The "extra interest" figure tells you the true cost of the IO feature.
💡 Key Facts & Information
During the interest-only phase: Monthly payment = P × r (where r = monthly rate). Principal stays constant. After IO phase: EMI = P × r × (1+r)^n / ((1+r)^n − 1) on the original principal over the amortising period. This higher post-IO EMI can be a shock — plan for it. Common uses in India: construction-linked loan payments during under-construction property purchase (builder collects interest-only pre-EMI until possession); bridge financing; and some NBFC structured products. Full EMI begins from the date of possession.