1. What is Interest Only Loan Calculator?

The Interest Only Loan Calculator calculates the monthly interest-only payment for ANZ loans. This type of loan requires paying only the interest portion for a specified period, after which principal repayments begin.

2. How Does the Calculator Work?

The calculator uses the interest-only formula:

Where:

• \( P \) — Principal loan amount (AUD/NZD)
• \( R \) — Monthly interest rate (decimal)
• \( EMI \) — Monthly interest-only payment (AUD/NZD)

Explanation: The calculation multiplies the principal amount by the monthly interest rate to determine the interest-only payment amount.

3. Importance of Interest Only Calculation

Details: Accurate interest-only payment calculation helps borrowers understand their short-term financial commitments and plan for the transition to principal-plus-interest payments.

4. Using the Calculator

Tips: Enter the principal amount in AUD/NZD and the monthly interest rate as a decimal (e.g., 0.005 for 0.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is an interest-only loan?
A: An interest-only loan requires paying only the interest portion for a set period, typically 1-10 years, after which principal repayments begin.

Q2: Who typically uses interest-only loans?
A: Investors and homeowners who want lower initial payments or who expect to sell the property before principal payments begin.

Q3: How do I convert annual rate to monthly?
A: Divide the annual interest rate by 12 (months). For example, 6% annual = 0.06/12 = 0.005 monthly rate.

Q4: What happens after the interest-only period?
A: Payments increase significantly as you begin paying both principal and interest, or you may need to refinance.

Q5: Are there risks with interest-only loans?
A: Yes, including payment shock when the interest-only period ends, and you may not build equity during the interest-only period.