What
is a Interest Only Loan?
Interest only loans allow a person to put off paying principal
for a set period of time. Over a term of 10, 15, or even more
years, a borrower can simply make payments towards the interest
on a mortgage. The rate of interest that a person is required
to pay is different in every state, and applicants in all
states generally have to have good credit to be considered
for interest only loans.
Compelling Long-term Benefits. . .
When a person is granted an interest only loan he will enjoy
lower monthly payments. This, alone, should help a borrower
save money, which in turn, should help him gain greater purchasing
power. There are times, as well, when a person paying an interest
only loan will be able to receive tax breaks.
Reasons for Getting an Interest Only Loan
People who are paying off mortgage loans are often making
monthly payments that only cover interest. However, they are
not benefitting from the lower APRs that are available with
many interest only loans. In essence, they are paying more
each month to achieve the exact same thing they could achieve
with an interest only loan. In certain situations, a balloon
payment will be required for a loan. The amount of the payment
is affected by a number of factors, including the state in
which the loan was received and, of course, the amount of
the loan. Even after making an initial payment, a person can
still save a substantial amount of money over an extended
period of time by securing an interest only loan.
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