Interest Only Loans

Interest Only Loans – when and why?

With interest only loans, borrowers only pay the interest on the loan through monthly payments for a fixed term, 2-3 years. Because the borrower is only paying interest charges each month rather than interest and a portion of the principal, payments are lower than they would be with a traditional amortizing loan. Definitely a more unique way of borrowing money, and perhaps even a risky one. So why would someone choose to borrow money in this fashion, and when would it make sense for one to do so?

A Borrower Might Consider an Interest Only Loan if They:

Interest Only Loans

Advantages of Interest Only Loans:

Disadvantages of Interest Only Loans:

When choosing an interest only loan, borrowers need a solid strategy for alternative uses for the money they’d otherwise pay towards the principal, as well as a strategy for getting rid of the debt. When this is the case, interest only loans tend to work well in favor of the borrower. Choosing an interest only loan for the sole purpose of buying a more expensive property or for the ease and appeal of putting off payments, though, is a risky approach and does not always pay off. If you need help determining if an interest only loan is for you, call us at (480) 835-5000 to speak with a specialist today!

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Annie Allen

About the author: Annie is a student at Brigham Young University, an entrepreneur, and an avid ice cream eater. She has happily been a team member at American Life Financial for two years now and loves learning about the ins and outs of real estate and lending, as well as the economics that affects the real estate market today.