When you pay both the principal and interest, you reduce your loan balance earlier in the loan term. Because interest is calculated on the outstanding balance of your business loan, this means the amount of interest you pay will also reduce.
However, during the interest only period, you’re not paying down the loan principal. As you’re not reducing your loan balance, you’ll end up paying more interest over the life of your loan.
You can switch between principal and interest repayment options during the life of your loan.
However, there are limits on the interest only periods for all of our business loans. These limits apply when you request a new or extended interest only period.
When your interest only period expires, your business loan payments will change to principal and interest. Your repayment amounts will increase as you start paying off your loan balance.
It’s important to be prepared for this change and plan accordingly. To find out the expiry date for your business loan, log on to NetBank > View account > Account Information and select your interest only business loan from the drop-down list.
All amounts, rates and calculations shown above are examples only and are not necessarily complete or accurate. They have been prepared without taking into account your objectives, financial or taxation situation or needs. You should consider the appropriateness of the information to your circumstances before acting on it. Credit provided by the Commonwealth Bank of Australia. These products are only available to approved business customers and for business purposes only. This offer cannot be used to refinance existing debt or purchase an asset. Applications for finance are subject to the Bank's eligibility and suitability criteria and normal credit approval processes. Individuals should view our current Terms and Conditions for Business Finance and consider them before making any decision about these products. Fees, charges and Terms & Conditions apply. For current interest rates, visit Business banking rates and fees. Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian credit licence 234945.