Line of Credit Payment Calculator

Estimate the minimum monthly payment for a line of credit based on your outstanding balance, interest rate, and the lender's payment structure.

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Understanding a Line of Credit (LOC)

A Line of Credit is a flexible form of borrowing. Unlike a traditional loan where you receive a lump sum upfront, a LOC gives you access to a set amount of funds (your credit limit) that you can draw from as needed. You only pay interest on the amount you have actually borrowed, not on the total credit limit.

This makes it an excellent tool for managing fluctuating expenses or for projects where the total cost is uncertain.

How to Use the Line of Credit Calculator

  1. Enter Balance and Rate: Input your current outstanding balance on the line of credit and its Annual Percentage Rate (APR).
  2. Define Payment Structure: Most lenders require a minimum payment that covers the monthly interest plus a small percentage of the principal balance. 1-2% is a common requirement.
  3. Calculate: See your estimated minimum monthly payment. Note that this payment will decrease as you pay down your balance.

Frequently Asked Questions (FAQ)

What is the "draw period" and "repayment period"?

Most lines of credit have two phases. The **Draw Period** (e.g., the first 10 years) is when you can freely borrow from and repay the line of credit, often making interest-only payments. After this period, you enter the **Repayment Period** (e.g., the next 20 years), where you can no longer borrow and must make regular principal and interest payments to pay off the balance.

Are the interest rates on a Line of Credit fixed or variable?

Most lines of credit, especially HELOCs, have **variable interest rates**. This means your rate is tied to a benchmark index (like the Prime Rate) and can go up or down over the life of the loan. This is a key difference from most fixed-rate installment loans.