Tools
Interest-only vs prepaid interest calculator
Compare paying interest monthly, prepaying it at settlement or adding it to the loan. See how much cash you receive and what you owe at the end of the term.
Estimate only. Not a quote, offer or advice.
Enter the loan amount, the rate from your offer and the term in months.
Assumptions
- Fees are not included; add them with the loan cost estimator.
- Prepaid interest is calculated on the full loan amount for the full term.
- Capitalised interest compounds monthly. Some lenders calculate it differently: check your offer.
How this is calculated
- Monthly interest = loan × annual rate ÷ 12.
- Prepaid cash received = loan − (monthly interest × months).
- Capitalised balance = loan × (1 + annual rate ÷ 12)^months.
What this means
This is a starting estimate from the figures you entered. A lender will run its own assessment, with its own rates, fees and buffers, so the real numbers can differ. Use it to test scenarios and to know which questions to ask.
Next steps
Ready to test your scenario with a lender?
- Free, and no credit check to enquire
- One short form, shared only with your consent
- Private and non-bank providers review your scenario
Free. No obligation. Not an application for credit.
Worked example
A $500,000 loan at 10% a year for 12 months.
- Monthly interest only: $500,000 × 10% ÷ 12 = about $4,167 a month, $50,000 over the year.
- Prepaid: the $50,000 is deducted at settlement, so you receive $450,000.
Same interest in dollars, but prepaid interest leaves you with $50,000 less cash on day one.
Figures are illustrative inputs, not Privet rates or offers.
Take your scenario to a lender →Frequently asked questions
Why would a lender prepay interest?
Prepaid or capitalised interest removes the need for monthly payments, which suits borrowers without regular income during the loan, such as during a build or sale.
Do I get prepaid interest back if I repay early?
It depends on the loan contract. Some refund unused interest and some do not, so ask before you sign.
Is this result financial advice?
No. The calculator only applies arithmetic to the figures you enter. It does not know your circumstances, so check results with a licensed adviser, lawyer or accountant before you sign anything.
Related finance types
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