Business Line of Credit Calculator
Understand the true cost of your business line of credit. See exactly how much you’ll pay in interest and fees so you can use credit wisely.
How the Business Line of Credit Calculator works
Enter your credit line amount, how much you’re using, and the interest rate. See your monthly interest cost, all fees, and the true annual rate you’re actually paying.
Lines of credit seem cheap until you add up all the fees. Understanding your true cost helps you use credit only when needed and pay it back quickly.
How it works
Tutorial
Lines of credit advertise low rates but hide fees that increase your actual cost. This guide shows you the real cost so you can use credit wisely and avoid expensive surprises.
You have two options: use the calculator above for instant credit cost analysis, or follow this guide to calculate costs manually.
The Formula
| What to Calculate | How to Calculate It |
|---|---|
| Monthly Interest | (Amount Borrowed × Annual Rate) ÷ 12 |
| Unused Line Fee | (Credit Not Used) × Fee Percentage |
| True Annual Rate | (Total Yearly Costs ÷ Average Balance) × 100 |
Step-by-Step Example
Let’s analyze a $100,000 credit line with 8% interest when you borrow $50,000.
Step 1: Calculate Monthly Interest
Find your interest cost at different borrowing amounts:
| How Much You Borrow | Interest Rate | Monthly Interest |
|---|---|---|
| $25,000 (25% of line) | 8% | $167 |
| $50,000 (50% of line) | 8% | $333 |
| $75,000 (75% of line) | 8% | $500 |
Calculation example:($50,000 × 0.08) ÷ 12 =$333 per month
Step 2: Add All Fees
Calculate the hidden costs beyond interest:
| Fee Type | Annual Cost |
|---|---|
| Annual Maintenance Fee | $500 |
| Unused Line Fee (0.5% on $50,000 not used) | $250 |
| Draw Fee (1% when you borrowed $50,000) | $500 |
| Total Fees Per Year | $1,250 |
Calculation:$500 + $250 + $500 =$1,250
Step 3: Calculate Your True Annual Rate
Find out what you’re really paying:
| What to Calculate | Amount |
|---|---|
| Interest for the Year ($333 × 12) | $3,996 |
| Plus All Fees | $1,250 |
| Total Cost Per Year | $5,246 |
| Amount You Borrowed | $50,000 |
| True Annual Rate: ($5,246 ÷ $50,000) × 100 | 10.49% |
Final Answer:You’re actually paying10.49%, not 8%
What This Means
The advertised 8% rate becomes 10.49% after fees. Use lines of credit only for short-term needs. If you need money for more than 6 months, a regular business loan usually costs less.
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