A software designed to find out the minimal quantity due on a credit score facility the place compensation covers solely the accrued curiosity for a selected interval. This calculation sometimes includes multiplying the excellent steadiness on the credit score line by the rate of interest, then dividing by the variety of cost intervals in a yr (e.g., 12 for month-to-month funds). For instance, a $10,000 steadiness with a 6% annual rate of interest would require a month-to-month cost of $50 primarily based solely on curiosity.
Such calculations are helpful as a result of they supply readability on the quick monetary obligation related to utilizing a credit score line. They permit customers to handle money circulation successfully in periods the place principal compensation is deferred. Traditionally, this cost construction has been utilized in varied lending contexts, providing debtors flexibility in managing debt, significantly in periods of monetary constraint or when anticipating a rise in future revenue.
