A line of credit lets you borrow up to a set limit and pay interest only on what you draw. Use the free line of credit calculator below to estimate your monthly payment, total interest and total cost of borrowing for any draw, rate and repayment term.
Line of Credit Calculator
Enter your credit limit, how much you plan to draw, the APR from your offer and how many months you'll take to repay. Add any draw or origination fee to see the full cost.
Line of Credit Payment Formula
For a draw repaid in equal monthly payments:
Monthly payment = D × r ÷ (1 − (1 + r)^−n)
- D = amount drawn
- r = monthly interest rate (APR ÷ 12)
- n = number of monthly payments
If your line is interest-only during the draw period, the monthly payment is simply D × r.
Line of Credit Example
You have a $100,000 line and draw $40,000 at 12% APR, repaid over 12 months.
| Item | Calculation | Result |
|---|---|---|
| Monthly rate | 12% ÷ 12 | 1% |
| Interest in the first month | $40,000 × 1% | $400.00 |
| Monthly payment | $40,000 × 0.01 ÷ (1 − 1.01^−12) | $3,553.95 |
| Total interest | $3,553.95 × 12 − $40,000 | $2,647.42 |
| Credit still available | $100,000 − $40,000 | $60,000 |
Because you only borrow what you need, the interest is far lower than on a $100,000 term loan at the same rate.
How Line of Credit Interest Works
- Interest applies to the drawn balance only. The unused part of your limit generally costs nothing in interest.
- Rates are often variable. Many business lines are priced at a benchmark such as the prime rate plus a margin, so payments can change. See our guide to commercial line of credit rates.
- Draw period vs repayment period. Some lines allow interest-only payments while you draw, then switch to principal-and-interest payments.
- Revolving credit. As you repay principal, that amount becomes available to draw again.
Fees That Change the Real Cost
| Fee | What it is |
|---|---|
| Origination fee | A one-off charge when the line is opened, often a percentage of the limit |
| Draw fee | A charge each time you take money from the line |
| Annual or maintenance fee | A recurring fee to keep the line open, even if unused |
| Late payment fee | Charged when a payment is missed or late |
Our guide to hidden line of credit charges covers what to look for in the fine print.
Line of Credit vs Term Loan
| Line of credit | Term loan | |
|---|---|---|
| How you receive funds | Draw as needed, up to a limit | One lump sum up front |
| Interest charged on | Drawn balance only | The full loan amount |
| Best for | Uneven or recurring cash needs | One-off purchases with a fixed cost |
| Reuse after repayment | Yes (revolving) | No |
For a deeper comparison, read business line of credit vs term loan, or start with our full guide to the business line of credit and secured vs unsecured lines.
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Frequently Asked Questions
How is interest on a line of credit calculated?
You pay interest only on the amount you have drawn, not the full limit. A simple monthly estimate is balance × APR ÷ 12. Many lenders calculate interest daily (balance × APR ÷ 365 × days), so your statement may differ slightly.
How do you calculate a line of credit payment?
For a draw repaid in equal monthly installments, payment = D × r ÷ (1 − (1 + r)^−n), where D is the amount drawn, r is the monthly rate (APR ÷ 12) and n is the number of months. For an interest-only payment, it is D × r.
What is the monthly payment on a $50,000 line of credit?
It depends on how much you draw, the rate and the term. If you draw the full $50,000 at 12% APR and repay it over 12 months, the payment is about $4,442 a month. Interest-only at the same rate would be $500 a month.
Do you pay interest on an unused line of credit?
Generally no. Interest is charged on the balance you've drawn. Some lenders charge an annual, maintenance or unused-line fee, so check your agreement.
What fees come with a business line of credit?
Common fees include origination fees, draw fees, annual or maintenance fees and late payment fees. Add them to the interest to compare the true cost of different offers.
Does a line of credit affect my credit utilization?
Yes. Utilization is your balance divided by your limit. Keeping drawn balances well below the limit generally looks better to lenders than running the line at its maximum.
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