A tool designed to compute the periodic cost associated with a revolving credit agreement where only the finance charge is paid each period is the subject of this exploration. For example, an individual with a $10,000 borrowing limit and an annual percentage rate of 8% who only remits the interest accruing each month would utilize this computation to determine the required monthly payment. The resultant calculation would reveal a payment of approximately $66.67, representing the monthly interest on the outstanding balance.
The ability to forecast the expenses linked to this repayment strategy facilitates improved budgetary control and financial planning. Historically, such calculations were performed manually, leading to potential inaccuracies. The advent of automated tools streamlines this process, offering greater precision and efficiency. This is particularly beneficial for businesses managing working capital or individuals seeking flexible financing options while minimizing short-term cash outflow.
