Loan & Credit Line Payment
Compare the payment on a loan or credit line as a fully amortizing loan versus interest-only — two very different monthly numbers for the same balance.
A worked example
Running this tool on current national benchmarks (Federal Reserve / Freddie Mac via FRED (St. Louis Fed)) — swap in your own numbers to see how the result moves.
- Loan or line balance
- $25,000
- Interest rate
- 9%
- Term (years)
- 5
- Payment type
- Amortizing (principal + interest)
clears the balance in 5 years
- Amortizing payment$518.96
- Interest-only payment$187.50
- Amortizing total interest$6,138
How the amortizing payment changes with loan or line balance
Holding the other inputs at the example above, here is how the result moves as loan or line balance changes.
| Loan or line balance | Amortizing payment | Amortizing payment |
|---|---|---|
| $10,000 | $207.58 | $207.58 |
| $25,000 | $518.96 | $518.96 |
| $50,000 | $1,037.92 | $1,037.92 |
| $100,000 | $2,075.84 | $2,075.84 |
The math behind it
The calculator shows the same balance two ways. The amortizing payment is sized to clear the balance over your term at the given rate, covering principal and interest. The interest-only payment is just the balance times the monthly rate — it holds the balance steady and never reduces principal. It reports both figures and the monthly difference, so you can see how much lower an interest-only payment is and what it leaves unpaid.
Assumptions & limits
- The amortizing option fully repays the balance over the term you enter.
- The interest-only option covers only accruing interest, so the principal remains untouched until you pay it separately.
- A fixed rate is assumed for both options.
- No fees are included; the interest-only figure assumes the full balance stays outstanding.
Common questions
What is the catch with an interest-only payment?
It keeps your monthly payment low, but the balance never shrinks. You pay interest month after month and still owe the full principal at the end. Interest-only makes sense only with a clear plan to repay the principal — from a sale, refinance or lump sum — not as a way to carry debt indefinitely.
How much lower is the interest-only payment?
It equals just the interest portion, so it is always smaller than the amortizing payment, which also repays principal. The calculator shows the exact monthly difference. That gap is the amount of principal you would be paying down under the amortizing option and skipping under interest-only.
When would I choose the amortizing payment instead?
When you want the balance actually paid off by a set date. The amortizing payment is higher, but it retires the debt over the term with no lump sum left over. For most borrowers repaying a loan or line, amortizing is the safer default.