Deferred Payment Loan Calculator (grace period, capitalized interest & payment after)

Understanding the deferred payment loan calculator — concept and principle

This calculator shows what a deferral (grace) period does to a loan. Depending on how interest is treated during the deferral, compounded, simple and capitalized, paid as you go, or not charged, it gives the balance when repayment starts, the interest added, the monthly payment afterwards, total interest and total paid, and the extra interest compared with repaying from the start. Use it for student loans, business loans and buy-now-pay-later offers.

During the grace year the balance grows by compounding interest; repayment then starts from the larger $21,234.

How it is calculated

With i = annual rate ÷ 12 and d months of deferral:

Compounding: balance = A × (1 + i)^d.
Simple, capitalized at the end: balance = A × (1 + i × d).
Interest-only: balance stays A; you pay A × i each month.
Subsidized: balance stays A, nothing added.
After deferral: payment = B × i ÷ (1 − (1 + i)^−n).
Extra interest is compared with the same loan repaid over the n-month term starting now.

The principle

A deferral postpones principal payments, but interest usually keeps running. If unpaid interest is capitalized, added to the balance, future interest is charged on it too, so the loan grows and the later payments are larger. Paying the interest during the deferral prevents this growth. A subsidized loan, where someone else pays the interest, is the only case in which deferral costs nothing extra.

Worked example

Default inputs: $20,000 at 6%, 12-month deferral with monthly compounding, then 60 months.

i = 0.5% a month; balance after deferral = 20,000 × 1.005¹² ≈ $21,234.
Interest added during the deferral ≈ $1,234.
Payment = 21,234 × 0.005 ÷ (1 − 1.005^−60) ≈ $410.50 a month.
Total paid = 410.50 × 60 ≈ $24,630; total interest ≈ $4,630.
Repaying $20,000 over 60 months from now would cost about $3,200 interest, so the deferral adds about $1,431.

Each point is the calculator re-run with only “Repayment term after the deferral (months)” changed; the gold point is the default example. Change the inputs above and this chart follows your numbers.

Repayment term after the deferral (months)	Monthly payment after the deferral
15	$1,472.85
30	$763.96
45	$528.10
60	$410.50
75	$340.21
90	$293.56
120	$235.74

How to read the result

The extra interest is the price of postponing payments. If you can afford it, paying at least the interest during the deferral keeps the balance from growing. Compare the payment after deferral with your expected income at that time.

Common mistakes

Assuming no interest accrues during a deferral.
Forgetting that capitalized interest earns interest itself.
Comparing payments only, not total cost.
Confusing deferment and forbearance rules on student loans, which treat interest differently.

Keep in mind: Loan terms differ; check whether interest is subsidized, capitalized and when. Read your loan agreement or ask your servicer. This is not financial advice.

Frequently asked questions

Does interest accrue during a deferment?

Usually yes, unless the loan is subsidized for that period.

What does capitalized interest mean?

Unpaid interest is added to the principal, so future interest is charged on it.

Should I pay interest during a grace period?

If you can, it prevents the balance from growing and lowers total cost.

Sources: Standard loan formulas: compound and simple accrual, capitalization at the end of a deferment and level-payment amortization

Checked 9 Nov 2026. Compound and simple accrual of interest, capitalization at the end of a deferment and level-payment amortization: standard loan formulas.

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