Interest Only Loans

The interest only loans are the loan where borrower only pay interest for a certain period, the principal amount will be accumulated. For this option, most of the lenders will allow borrower to pay interest during 1st 3 years to 10 years. After the period all amount owed will be amortized for the remainder of its term. The interest rate of the loan will be reset, typically will be increase and schedule to remaining terms.

Although the loan is convenient to those without fixed income, but the facilities of the loan is not free. After the interest only period, during the remaining amount amortizing, generally the interest increase 5% to 17% compare to regular loans. Thus, if you are not a self-discipline person, you are definitely not appropriate to take the loan.

There are several loan terms from the loans, 10 years, 15 years and the longest is 40 years. Basically 1/3 of the term period will treated as interest only period. After the said period, borrower must paying the amount scheduled in full each month.

When considered the loan, please spend some times to investigate the regulations, terms and conditions set by the lender. Some lender allow borrower to make extra payment while some are not. Please check the payment is applied to the principal, or is treated as a prepayment of the next month's payment.

A lot of investors use these loans to buy properties or any valuable assets. Provided the property or asset can be sold at the end of the loan to payoff the debt. These loan types can be turning into blessing or curse are totally depend on borrower. If the borrower is kind of disciplined investor, the loan could be a helping hand. If the borrower is not, this loan can turn to be "nightmare".

For more information about other loans, please check out Various Loans Guide instead of Interest Only Loans

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