A tool that estimates the cost of a home equity line of credit (HELOC) when only the accrued interest is paid each period. This calculation focuses solely on the interest component of the debt, excluding any principal repayment. For instance, with a $50,000 HELOC at a 6% annual interest rate, the calculator would compute the monthly interest expense based on that rate, illustrating the minimum payment required to prevent the balance from growing.
Understanding the implications of this payment structure is crucial for borrowers. It provides a clear view of the immediate cash outflow required to service the debt. This can be particularly beneficial during periods of financial constraint or when prioritizing other investments. Historically, interest-only periods have been utilized to manage short-term expenses, but they require careful planning to address the principal balance before the interest-only period ends.
