Line of Credit Calculator

A line of credit calculator turns a revolving balance into three numbers your statement never shows together: this month's interest, how many months until the balance hits zero, and the total interest along the way. Draw $25,000 at a 12% APR and the finance charge is $250 in month one; pay a fixed $500 a month and you are debt-free in 5 years 10 months for $9,831 of interest.

Three neighboring tools cover the cases this page does not. The HELOC Calculator handles a line secured by your home, where available credit depends on your combined loan-to-value and the repayment phase amortizes on a set term. The Credit Card Payoff Calculator covers the same revolving math with card-specific minimum-payment rules. The Personal Loan Calculator is the right tool when the money arrives as a single lump sum on a fixed schedule. Use this page for an unsecured or business credit line where you choose the payment yourself.

How interest on a line of credit works

A line of credit is revolving credit. The lender approves a limit, you draw against it when you need money, and interest accrues only on what you have actually drawn. An unused limit costs nothing in interest. Repaying principal during the draw period puts that credit back on the line, ready to borrow again.

The monthly finance charge is the balance times the monthly periodic rate, and the monthly rate is simply the APR divided by twelve:

Whatever you pay above that charge reduces the principal, and next month's interest is calculated on the smaller balance:

That is the whole model. There is no amortization formula to solve for, because a line of credit has no fixed term: the payoff date is whatever your payment makes it. The calculator runs the two lines above month after month until the balance reaches zero, counting the months and adding up the interest.

One consequence is worth stating plainly. If your payment is equal to or below the monthly interest charge, the balance never falls. On $25,000 at 12% APR, the break-even payment is exactly $250. Pay $249 and the balance grows. Pay $251 and you are technically paying it off, but at one dollar of principal per month it would take an eternity. Every useful payment is comfortably above the interest charge.

Worked example: $25,000 drawn at a 12% APR

Suppose you have drawn $25,000 on a credit line with a 12% APR and decide to pay a flat $500 a month with no draw period.

• Monthly rate: 12% ÷ 12 = 1.000% per month.
• Month 1 interest: $25,000 × 0.01 = $250.00.
• Month 1 principal: $500 − $250 = $250.00, leaving a balance of $24,750.00.
• Month 2 interest: $24,750 × 0.01 = $247.50, so $252.50 goes to principal and the balance drops to $24,497.50.
• Payoff: the balance reaches zero on payment number 70, which is 5 years 10 months.
• Total interest: $9,831. Total of payments: $34,831 for $25,000 borrowed.

Notice how the split shifts. In month one the payment is exactly half interest; by the final months almost all of it is principal. That is why raising the payment early does so much more good than raising it late - it attacks the balance while the interest charge is still large.

Now change one thing. Pay interest only instead, and the month-one charge is still $250, but the balance is still $25,000 in month 70 and you have handed over $17,500 with nothing to show for it. Interest-only is a cash-flow decision, never a payoff plan.

Monthly interest by balance and APR

This table is the interest-only cost of carrying a balance: balance × APR ÷ 12, rounded to the dollar. It is what you pay each month just to keep the balance standing still.

The charge scales exactly with both inputs: double the balance and the interest doubles, add three points of APR and it rises by a quarter at the 12% level. Any payment you make has to clear the number in this table before a single dollar touches the principal.

Payoff time and total interest by payment size

Same $25,000 balance, same 12% APR, only the fixed monthly payment changes. Every figure below is the month-by-month simulation described above, run to a zero balance.

The curve is brutally non-linear at the bottom. Going from $300 to $400 saves $14,592 of interest; going from $750 to $1,000 saves only $1,650. The closer your payment sits to the interest charge, the more every extra dollar is worth.

The three payment rules, side by side

Lines of credit set minimum payments in different ways, and the rule matters as much as the rate. The calculator supports all three. This table holds the balance at $25,000 and the APR at 12% and changes only the rule.

Compare rows three and five. Both start at $500. The percent rule lets the payment shrink as the balance falls and takes 24 years 11 months at a cost of $23,483. Freezing that same $500 in place finishes in 5 years 10 months for $9,831. Nothing about the rate, the balance or your first month changed - only the decision to stop letting the payment slide down.

What an interest-only draw period costs you

Many lines of credit open with a draw period during which the minimum payment is interest only. It keeps early cash flow light, and for a genuine bridge - a renovation, a seasonal working-capital gap - that is exactly the point. But every interest-only month is a month the balance does not move, and the interest still runs.

On the same $25,000 at 12% APR with $500 a month afterwards, the draw period simply adds itself to the timeline and $250 of interest per month to the bill:

Five years of interest-only payments on this balance cost $15,000 and leave you exactly where you started, which is why the total interest almost triples. If your line has a long draw period, treat the interest-only minimum as a floor, not a plan, and pay principal voluntarily whenever cash allows.

How to use this calculator

1. Enter your drawn balance - the amount you owe today, not your credit limit. An unused limit accrues no interest.
2. Enter the APR from your statement or agreement. The calculator shows the monthly rate it derives from it, so you can check it against the periodic rate your lender prints.
3. Pick the payment rule. Interest only shows the cost of standing still. Fixed dollar amount is what a real payoff plan looks like. Percent of balance reproduces a declining minimum, with a dollar floor for the tail end.
4. Add a draw period if your line starts with interest-only months before repayment begins. Leave it on None if you are repaying from today.
5. Read the result card for the payment, the interest and principal split in the first month, the number of months to payoff and the total interest.
6. Scan the comparison table underneath. It re-runs the whole simulation at six payment levels around yours, so you can see exactly what another $100 a month buys.

Who this calculator is for

Anyone carrying a revolving balance who has to choose the payment themselves. That includes borrowers with an unsecured personal line of credit from a bank or credit union, small-business owners drawing on a business line of credit for inventory or payroll gaps, homeowners with a home equity line who want to model the drawn balance alone rather than the equity math, and anyone weighing a line of credit against an installment loan. It is also useful before you borrow: enter the amount you are thinking of drawing and see the payment that would clear it in a timeframe you can live with.

Key terms

• Credit limit - the maximum you may have outstanding at any time. It does not accrue interest.
• Drawn balance - the amount actually borrowed and outstanding. This is what interest is charged on.
• Available credit - limit minus drawn balance. Paying principal down restores it during the draw period.
• APR - the annual percentage rate. Divided by twelve it gives the monthly periodic rate used to compute each month's finance charge.
• Monthly periodic rate - APR ÷ 12. A 12% APR is 1.000% a month; an 18% APR is 1.500% a month.
• Minimum payment - the least the lender will accept, often interest plus a small percentage of principal, or a flat dollar floor.
• Draw period - the window in which you may borrow, frequently with interest-only minimums.
• Repayment period - the phase after the draw period, when the line closes to new advances and the balance must be paid down.
• Revolving credit - credit you can repay and re-borrow, as opposed to an installment loan that pays down to zero on a schedule.
• Utilization - drawn balance divided by credit limit. Credit scoring models watch it, and a high figure can weigh on your score.

What changes the result

• The payment size. The single biggest lever. On $25,000 at 12%, $500 a month costs $9,831 of interest and $300 a month costs $29,021 - nearly three times as much for the same debt.
• The APR. Holding the payment at $500 on the same balance, an 8% APR clears it in 5 years 2 months for $5,511; at 15% it takes 6 years 7 months and $14,478; at 18% it stretches to 7 years 10 months and $21,556.
• Whether the payment is fixed or declining. A percent-of-balance minimum drops as the balance drops and quadruples the payoff time compared with holding the same dollar amount.
• New draws. The calculator assumes you stop drawing. Every new advance restarts the clock on the amount you add.
• Rate changes. Most lines are variable. A rate that rises mid-payoff raises the interest charge and, if your payment is fixed, slows the principal reduction.
• Fees. Annual fees, draw fees and inactivity fees are flat costs on top of interest and are not modeled here.

Tips to pay a credit line down faster

• Freeze the dollar amount. When the minimum falls because your balance fell, keep paying the old figure. This is the cheapest change available and costs nothing today.
• Round up. Going from $500 to $750 on $25,000 at 12% cuts the payoff from 5 years 10 months to 3 years 5 months and saves $4,269 of interest.
• Stop drawing while you repay. A revolving line will happily stay alive forever if you keep re-borrowing what you pay off.
• Pay early in the month if interest accrues daily. Many lenders compute a daily periodic rate on the average daily balance, so an earlier payment lowers that average.
• Throw irregular money at principal. A bonus or a tax refund applied to principal stops accruing interest the day it lands.
• Ask about the margin. Variable-rate lines price as an index plus a margin. If your credit has improved since you opened the line, it can be worth asking whether the margin can be reduced.

Limitations of this model

The calculator uses monthly accrual at APR ÷ 12, the convention most lenders disclose. Some lines instead apply a daily periodic rate to the average daily balance, which produces slightly more interest over a year for the same nominal APR - about 12.68% effective on a 12% nominal rate compounded monthly, and 19.56% on an 18% rate. Treat the output as a close estimate rather than a statement reconciliation.

It also assumes no further draws, a constant rate, on-time payments, and no fees. If your line is secured by your home, the risk profile is different in a way no calculator captures: missing payments can put the property at stake. And because a line of credit has no contractual amortization, the payoff date here is a projection of your own behavior, not a term the lender has promised.

Related options

• For a credit line secured by your home, with available credit driven by your combined loan-to-value, use the HELOC Calculator.
• For a revolving card balance with card-style minimum-payment rules, use the Credit Card Payoff Calculator.
• For a lump sum on a fixed schedule, use the Personal Loan Calculator or the general Loan Calculator.
• To compare the true cost of two offers once fees are included, use the APR Calculator.
• To model an interest-only phase followed by amortization on a term loan, use the Interest Only Calculator.
• To attack several balances at once with a snowball or avalanche order, use the Debt Payoff Calculator.
• For a business credit line you are comparing against a term loan, see the Business Loan Calculator.

Sources

• Consumer Financial Protection Bureau (CFPB) - What is a line of credit?
• Consumer Financial Protection Bureau (CFPB) - What is a home equity line of credit (HELOC)?
• Consumer Financial Protection Bureau (CFPB) - Interest rate vs. APR
• U.S. Small Business Administration (SBA) - Loans and lines of credit for small businesses.