Deferred Payment Loan Calculator
Calculate the single payoff amount on a deferred payment loan, where interest compounds on the full balance until one payment at maturity.
How to use this calculator
- 1Enter the amount borrowed, the annual rate, and how often interest compounds.
- 2Set the term until the single repayment is due — there are no payments before then.
- 3Compare the amount due against what a regular amortizing loan of the same rate and term would actually cost — deferring every payment to the end is rarely the cheaper option.
How the calculation works
Amount due = Loan amount × (1 + rate/n)^(n × years)- rate
- Annual interest rate, as a decimal
- n
- Compounding periods per year
- years
- Term until the single repayment
This is the same compound-growth formula a certificate of deposit uses — a deferred payment loan is mathematically identical to a CD, just from the borrower's side of the transaction instead of the depositor's.
Continuous compounding uses Amount due = Loan amount × e^(rate × years) instead, the limit of the formula above as the compounding frequency approaches infinite.
Worked example
$20,000 at 8% APR, monthly compounding, over 3 years
- 1.Monthly rate: 8% ÷ 12 = 0.6667%. Number of periods: 12 × 3 = 36.
- 2.Amount due: $20,000 × (1 + 0.08/12)^36 = $20,000 × 1.270237 = $25,404.74.
- 3.Total interest: $25,404.74 − $20,000 = $5,404.74.
Result: $25,404.74 due at maturity, $5,404.74 in interest
How this differs from an ordinary loan
Most loans are amortizing: each payment covers that period's interest and reduces the principal, so the balance shrinks steadily until it reaches zero on the final payment. A deferred payment loan works completely differently — nothing is paid until a single date, and interest compounds on the entire growing balance the whole time. The two structures can carry an identical stated interest rate and still produce very different total costs, because an amortizing loan's balance falls (so interest accrues on less and less), while a deferred loan's balance only grows.
Where this structure actually shows up
A pure deferred-payment structure is uncommon in everyday consumer lending, but the underlying mechanics appear in several real products.
- Balloon loans — smaller regular payments for most of the term, followed by one large final payment — a hybrid, but the final balloon behaves like a deferred loan for whatever balance remains at that point.
- Zero-coupon bonds — sold at a discount to face value with no periodic interest payments, maturing at face value — the mirror image of this calculator from an investor's perspective rather than a borrower's.
- Deferred-interest promotional financing — "no interest if paid in full within 12 months" store financing, where unpaid interest accrues silently the whole time and becomes due in full — often retroactively to the purchase date — if the balance is not fully cleared by the deadline.
Why the total cost can be higher than it looks
Because nothing is paid down along the way, every compounding period charges interest on a larger balance than it would have if even partial payments had been made. Over a long enough term, this compounding-on-a-growing-balance effect can make the total interest substantially higher than the equivalent amortizing loan at the same stated rate — the rate is identical, but what it is being applied to is not.
What this assumes, and where it stops
Assumptions
- No payments of any kind occur before maturity — this models a pure deferred structure, not a balloon loan with smaller payments along the way.
- The interest rate is fixed for the entire term.
Limitations
- Most real-world lenders require some form of security or a strong credit case for a true single-payment loan structure, since the lender carries the full balance at risk for the entire term with no interim payments.
- Deferred-interest promotional financing often works differently in practice — if the balance is not cleared by the deadline, some promotions charge the accrued interest retroactively to the original purchase date rather than only from that point forward. Read the specific terms rather than assuming this calculator's smooth compounding applies.
Common questions
Is this the same as a balloon payment?
Related but not identical. A balloon loan typically has smaller regular payments throughout the term, with only the remaining balance due as a lump sum at the end. This calculator models a pure deferred structure with no payments at all until the single payoff date — a balloon loan's final payment can be estimated by treating its remaining balance at that point as the "loan amount" here.
Why is the effective rate higher than the stated APR?
Whenever compounding happens more than once a year, the effective annual rate — what you actually pay across a full year — comes out slightly higher than the stated nominal APR, because interest earned partway through the year itself starts earning interest before the year is up. The more frequent the compounding, the larger this gap.
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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