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.