Interest-Only Loan Calculator
Model a loan with an interest-only phase followed by full EMIs — see both payment levels and exactly what the deferred principal repayment costs you.
⏳ Interest-Only Loan Calculator
Interest-Only Lending: Cheap Months, Expensive Loan
An IO loan splits tenure in two. During the IO phase you pay only interest — the principal doesn't shrink by a rupee. When the phase ends, the untouched principal must amortise over the shorter remaining tenure, so the post-IO EMI lands higher than a standard loan's. You trade early-cash-flow relief for a permanently costlier loan.
Where India Actually Uses Interest-Only Structures
- Pre-EMI on under-construction homes: most common. You pay interest only on disbursed amounts until possession. Convenient — but repays zero principal.
- Education-loan moratorium: servicing simple interest during study (instead of letting it capitalise) is the single highest-ROI move a student borrower makes.
- Business ODs: effectively perpetual IO — interest monthly, principal whenever.
- Gold-loan bullet schemes: IO with a 12-month cap under RBI 2026 rules.
Who Should Choose IO
Bridging a known income gap (course completion, business ramp-up). Not: affording a house whose full EMI you can't pay today. Stress-test yourself on the post-IO EMI; if it doesn't fit year 3, the teaser payment is a trap.
Frequently Asked Questions
Is pre-EMI interest tax-deductible?
Not in the years paid. Accumulates as pre-construction interest, claimable in five instalments starting completion year — within ₹2L cap (old regime, self-occupied).
Pre-EMI or full EMI from day one?
Full EMI wins financially — principal repayment starts earlier, lower total interest. Pre-EMI wins only when cash flow genuinely cannot support both.