**Interest**Rate – The proportion of a

**loan**that is charged as

**interest**to the borrower, typically expressed as an annual percentage of the

**loan**outstanding.

**Interest**-

**Only Loan**–

**Loans**where the borrower pays

**only**the

**interest**on the principal balance for a set term while the principal balance remains unchanged.

Similarly, you may ask, what is the payment on an interest only loan?

The borrower only pays the interest on the mortgage through monthly payments for a term that is fixed on an interest-only mortgage loan. The term is usually between 5 and 7 years. After the term is over, many

**refinance**their homes, make a lump sum payment, or they begin paying off the**principal**of the loan.How do you calculate a loan payment?

The

**loan**payment**calculation**for an interest-only**loan**is easier. Multiply the amount you borrow by the annual interest rate. Then divide by the number of payments per year. Assuming you never make additional payments to reduce the principal balance, your monthly payment will remain the same.