How does the reducing-balance interest calculation work?

When interest applies, each period's interest is calculated on the outstanding balance (not the original amount). This means the interest portion of each payment falls as the balance reduces, while the principal portion rises — the same method used for most Australian mortgage calculations.

Can I change the payment frequency mid-plan?

This calculator generates a plan with a single frequency. If you need to change the frequency mid-plan, generate a new schedule from the remaining balance and remaining period.

Does the payment plan reset the limitation period?

A signed payment plan in which the debtor acknowledges the debt can reset the limitation period in most Australian states. However, limitation law is state-specific and you should obtain legal advice if this is a concern.

How many instalments should I allow?

This depends on the amount and the debtor's circumstances. As a guide, plans exceeding 12 months are harder to monitor and enforce, and carry more risk of default. For large balances, Merion can often achieve faster resolution.

Free calculator

Payment Plan Scheduler

When a debtor agrees to pay by instalments, this tool generates a complete schedule showing each due date, the payment amount, interest (if applicable), and the outstanding balance. Use it to populate a payment plan agreement.

Payment plan details

Total amount owed (AUD)

First payment date

Payment frequency

Number of instalments

Between 2 and 52 instalments.

Annual interest rate on outstanding balance (%)

% p.a.

Enter 0 for equal instalments with no interest. If a rate is entered, the reducing balance method is used.

#	Due Date	Payment	Interest	Principal	Balance
1	30 July 2026	$416.67	$0.00	$416.67	$4,583.33
2	30 Aug 2026	$416.67	$0.00	$416.67	$4,166.67
3	30 Sept 2026	$416.67	$0.00	$416.67	$3,750.00
4	30 Oct 2026	$416.67	$0.00	$416.67	$3,333.33
5	30 Nov 2026	$416.67	$0.00	$416.67	$2,916.67
6	30 Dec 2026	$416.67	$0.00	$416.67	$2,500.00
7	30 Jan 2027	$416.67	$0.00	$416.67	$2,083.33
8	2 Mar 2027	$416.67	$0.00	$416.67	$1,666.67
9	30 Mar 2027	$416.67	$0.00	$416.67	$1,250.00
10	30 Apr 2027	$416.67	$0.00	$416.67	$833.33
11	30 May 2027	$416.67	$0.00	$416.67	$416.67
12	30 June 2027	$416.67	$0.00	$416.67	$0.00

How the schedule is calculated

When no interest rate is entered, instalments are equal (with the last instalment adjusted for any rounding). When an interest rate is applied, the reducing balance method is used: each instalment covers the interest accrued on the outstanding balance for that period, with the remainder reducing the principal. The formula for the periodic instalment is: P × r ÷ (1 − (1 + r)^−n), where r is the periodic interest rate and n is the number of instalments.

This schedule is indicative only — not financial or legal advice. Ensure any payment plan is documented in a written agreement signed by both parties. Seek legal advice if you are unsure of your rights or obligations.

How to use the schedule

Copy the dates and amounts from the schedule directly into your Payment Plan Template. Use the running balance column to monitor compliance — when each payment arrives, tick it off against the schedule. If the balance after payment does not match the schedule, something has gone wrong.

If a payment is missed, the full remaining balance accelerates and becomes immediately due (assuming your agreement includes an acceleration clause, which it should). Act on a missed payment immediately — do not wait for the next scheduled date.

Should I charge interest on a payment plan?

Suspending interest is often used as an incentive for the debtor to enter into and maintain the plan. Continuing to charge interest maintains your contractual position and compensates you for the time value of the deferred payment. Whichever you choose, document it clearly in the agreement — ambiguity about whether interest is running is a common source of disputes.

What to do if a payment is missed

Contact the debtor the same day or the following morning. Most missed payments are administrative errors — a simple reminder resolves them. If there is no satisfactory response within 48–72 hours, or if this is a repeat missed payment, refer the remaining balance to Merion. The signed payment plan agreement is strong evidence of the debt and the debtor's acknowledgement of it.

Related tools: Payment Plan Template · Interest Calculator

This is an indicative calculation only — not financial or legal advice. Always document agreed payment terms in a signed written agreement. Seek legal advice on enforceability in your jurisdiction.

Plan not working?

Refer to Merion when the plan breaks down.

Commission-only recovery — you pay nothing unless we collect. A signed payment plan is strong evidence.

Refer a debt Payment plan template

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