Why is the jump so large?

Because the same principal now has to be repaid over a shorter period. Five years of interest-only on a twenty-year loan leaves fifteen years to clear what twenty would have cleared.

Finance & Loansloans

Interest-Only Loan Calculator

An interest-only loan and the payment jump when principal starts. The balance does not fall by a rupee during the interest-only period, which is the whole risk.

Also called: io loan calculator.

Payment during the interest-only period

₹35,417

₹35,417 a month while interest only, then ₹49,237 once principal starts, a jump of ₹13,820. The principal is unchanged at the switch.

Payment after the switch

₹49,237

Size of the jump

₹13,820

Interest paid during the interest-only period

₹21,25,000

Total interest over the loan

₹59,87,656

Extra interest against amortising throughout

₹5,73,777

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

This is what the calculation gives for the numbers you entered. It is an estimate, not advice, and it knows nothing about your situation beyond those numbers. Rules for India change on a published schedule; the effective date is shown on every rule-based tool.

How this is calculated

During the interest-only period the payment covers interest exactly, so the principal is identical at the end of it. The amortising payment then has to clear the full principal over a shorter remaining term, which makes the jump larger than people expect.

interest-only payment is just the interest; the later payment amortises the full principal over what remains

P: Principal (currency)
m: Months after the interest-only period (months)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

five years interest only on a twenty year loan

Loan amount: ₹50,00,000
Interest rate: 8.5%
Interest-only period: 60 months
Total term: 240 months

Payment during the interest-only period₹35,417

50 lakh * 8.5% / 12, worked by hand

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a zero rate has no interest-only payment

Loan amount: ₹50,00,000
Interest rate: 0%
Interest-only period: 60 months
Total term: 240 months

Payment during the interest-only period₹0

boundary

Open this example

Method and limits

What it assumes

A fixed rate throughout.

What it deliberately does not model

Rate resets at the switch are common and would make the jump larger still.

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Frequently asked questions

Why is the jump so large?: Because the same principal now has to be repaid over a shorter period. Five years of interest-only on a twenty-year loan leaves fifteen years to clear what twenty would have cleared.