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How to calculate Interest-only payment

The Interest-only payment formula, with plain worked examples you can check yourself.

Interest-only payment = P × r ÷ 12

Worked examples

P = 4800 · r = 6%Interest-only payment = 24
P = 1200 · r = 9%Interest-only payment = 9
P = 2400 · r = 6%Interest-only payment = 12

How to use it

  1. Write down the values for each letter in the formula.
  2. Do the brackets first, then divide or multiply.
  3. Check the units before you compare results.
  4. Compare the answer with last period or with a competitor to see if it is good or bad.

This formula belongs to Cash & Liquidity.

Related terms

Cash flowLiquidityWorking capitalOverdraft

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