Use the loan interest payment calculator to calculate your monthly payment for interest only commercial loans. Or, you can find out how much to pay to prevent capitalized interest on a deferred loan.
What is an interest only loan?
This is a loan where either the lender's payment terms include making interest-only payments while in school, or the borrower decides to do that voluntarily, even though the interest can be deferred with the principal, until after leaving college.
Some private student loans require you to make monthly payments, covering interest. (Sallie Mae college loans) is the most notable lender with this type of program.) If it is required as a condition for the loan, your lender will send you a statement with the amount you are to pay each month.
Because government school loans have a fixed rate, your interest-only monthly payment would stay the same each month. Commercial loan interest rates are mostly variable and change monthly, quarterly or annually. They are linked to either the LIBOR or Prime rate.
For example, the rate might be 4.5 + LIBOR (capped at 10.5 + LIBOR). You will need to know what the LIBOR or Prime rate is for the payment to be accurate and it will change periodically.
Calculate Loan Interest
If you have a variable rate loan, make sure you enter the beginning rate and then use the calculator again to enter the loan cap rate. That way, you can get the starting payment, but you can also see how high the monthly payment might go.
If you plan to defer a loan for any reason, try to pay just the monthly interest while it is deferred. The calculator can help you see if this is an amount you can manage. The benefits of not deferring this interest are shown by the accrued interest calculator.
If you do not make these monthly payments, the capitalized interest is added to the principal balance of the loan and you will be paying interest on interest for the life of the loan.
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