Loan & Line of Credit Payment Calculator

Installment Loans vs. Lines of Credit: Payment Differences

Understanding how payments work for different types of debt is crucial for managing your finances. This calculator helps illustrate the difference between two common structures:

• Installment Loans (e.g., Auto Loans, Mortgages, Personal Loans):** You borrow a fixed amount and repay it over a set term with regular, fixed payments. Each payment covers both the interest accrued and a portion of the principal balance. The payment is calculated so the loan is fully paid off at the end of the term.
• Lines of Credit (LOCs) (e.g., HELOCs, Personal LOCs):** You have access to a credit limit and can draw funds as needed up to that limit. Payments, especially during an initial "draw period," are often based on the outstanding balance and may only require covering the interest accrued (**interest-only**) or interest plus a small percentage of the principal. Making only minimum or interest-only payments typically won't pay off the balance quickly, if at all, during the draw phase.

What This Calculator Shows

This tool takes a loan amount (or LOC balance) and an interest rate and calculates two potential monthly payments:

1. Estimated Fixed P&I Payment:** This shows the payment amount required to fully pay off the entered balance over the specified loan term, assuming it's a standard installment loan. It includes both principal and interest.
2. Estimated Interest-Only Payment:** This shows only the amount needed to cover the interest accrued on the balance for one month. This is similar to the minimum payment required during the draw period of many LOCs. **Note:** Paying only this amount does not reduce your principal balance.

It also shows the total interest and total amount paid *for the fixed P&I scenario* to illustrate the full cost of that repayment structure.

How to Use This Calculator

1. Enter the Loan Amount / LOC Balance you want to analyze.
2. Input the Annual Interest Rate (APR).
3. Enter a Loan Term in Years. This is primarily used to calculate the fixed P&I payment amount for comparison purposes.
4. Click "Calculate Payments".
5. Compare the "Est. Fixed P&I Payment" (for an installment loan structure) and the "Est. Interest-Only Payment" (typical for an LOC draw period).

Disclaimer: This calculator provides estimates for comparison purposes. The interest-only payment is a snapshot based on the current balance and rate. The fixed P&I payment calculation assumes it's an installment loan. Actual payments on lines of credit will vary based on the outstanding balance, variable interest rates, and specific lender terms (e.g., minimum payment might be interest + 1% of principal). Does not account for fees.