1. What is Interest Only Calculation?

The interest only calculation determines how much interest will be paid on a principal amount at a given rate, without considering any principal repayment.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( Principal \) — The initial amount of money ($)
• \( Rate \) — The interest rate (as decimal)

Explanation: This calculates only the interest portion of a payment, not including any principal reduction.

3. Importance of Interest Calculation

Details: Understanding interest-only payments helps in financial planning, loan comparisons, and investment decisions.

4. Using the Calculator

Tips: Enter principal in dollars, rate as decimal (5% = 0.05). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q2: When are interest-only payments used?
A: Common in some loans (like mortgages) where borrower pays only interest for initial period before principal payments begin.

Q3: How do I convert APR to decimal?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).

Q4: Are there limitations to this calculation?
A: This doesn't account for compounding, fees, or changing rates over time.

Q5: Can this be used for investment returns?
A: Yes, it can estimate returns on simple interest investments.