A Line of Credit (LOC) is a flexible borrowing tool offered by financial institutions, much like a credit card but often with more favorable terms and higher limits. Instead of a lump sum, an LOC provides access to a revolving credit limit that you can draw from as needed, repay, and then redraw again. This makes it ideal for managing fluctuating expenses, ongoing projects, or unexpected financial needs.
How the Calculator Works
This Line of Credit Calculator helps you understand two key aspects of your LOC: the Estimated Monthly Interest Cost and the Estimated Maximum Available Draw based on your desired monthly payment. It assumes you are actively drawing from your LOC and want to know the implications of your repayment strategy.
Key Inputs Explained:
Maximum Credit Limit: This is the total amount you are approved to borrow from your line of credit.
Current Annual Interest Rate (%): The yearly percentage charged on the outstanding balance of your LOC. Remember to convert this to a decimal for calculations (e.g., 12.5% becomes 0.125).
Desired Monthly Payment: The amount you plan to pay towards your LOC each month. This calculator assumes your payment covers at least the interest accrued and a portion of the principal.
The Calculations:
The calculator performs the following estimations:
Monthly Interest Rate: The annual rate is divided by 12 to get the monthly rate.
Formula: Monthly Rate = Annual Rate / 12
Estimated Monthly Interest Cost: This is calculated based on the current outstanding balance (which we approximate as the maximum credit limit if you are drawing fully) and the monthly interest rate. If the desired monthly payment is less than the calculated interest, it indicates a potential issue where you might only be covering interest.
Formula: Monthly Interest Cost = (Maximum Credit Limit * Annual Interest Rate) / 12
Estimated Maximum Available Draw: If your desired monthly payment is sufficient to cover the monthly interest, the remaining portion of your payment can be applied to reduce the principal. The available draw is then the Maximum Credit Limit minus the outstanding balance (which is assumed to be the Maximum Credit Limit minus the principal paid from your desired payment). For simplicity in this tool, we'll calculate the portion of your payment that goes towards principal and subtract it from the maximum credit limit to show how much you *could* draw if you made that payment.
Formula: Principal Paid = Desired Monthly Payment – Monthly Interest Cost Formula: Estimated Available Draw = Maximum Credit Limit – Principal Paid (if Principal Paid is positive, otherwise it's 0)
Important Considerations:
This calculator provides estimations. Actual interest and available draw amounts may vary based on the lender's specific calculation methods, fees, and the exact day you make payments.
Always ensure your desired monthly payment is sufficient to cover at least the accrued interest to avoid negatively impacting your credit or increasing your debt faster than expected.
Lines of credit often have variable interest rates, meaning the rate can change over time, affecting your monthly interest cost and repayment schedule.
Check your LOC agreement for details on minimum payments, fees (like annual fees or draw fees), and grace periods.
function calculateLOC() {
var availableCredit = parseFloat(document.getElementById("availableCredit").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var monthlyPayment = parseFloat(document.getElementById("monthlyPayment").value);
var availableDraw = "–";
var monthlyInterest = "–";
if (!isNaN(availableCredit) && availableCredit >= 0 &&
!isNaN(interestRate) && interestRate >= 0 &&
!isNaN(monthlyPayment) && monthlyPayment >= 0) {
var annualRateDecimal = interestRate / 100;
var monthlyRate = annualRateDecimal / 12;
// Estimate monthly interest assuming the full credit limit is drawn
monthlyInterest = (availableCredit * monthlyRate);
// Calculate principal portion of the payment
var principalPaid = monthlyPayment – monthlyInterest;
if (principalPaid >= 0) {
// If payment exceeds interest, calculate remaining available draw
availableDraw = availableCredit – principalPaid;
if (availableDraw < 0) { // Ensure available draw doesn't go below zero if payment is very high
availableDraw = 0;
}
} else {
// If payment doesn't even cover interest, the available draw is effectively zero (or negative)
availableDraw = 0; // Or could be shown as a deficit
// Consider adding a warning here if monthlyPayment < monthlyInterest
}
// Format results to two decimal places
monthlyInterest = monthlyInterest.toFixed(2);
availableDraw = availableDraw.toFixed(2);
} else {
alert("Please enter valid positive numbers for all fields.");
}
document.getElementById("monthlyInterest").innerText = monthlyInterest === "–" ? "–" : "$" + monthlyInterest;
document.getElementById("availableDraw").innerText = availableDraw === "–" ? "–" : "$" + availableDraw;
}