Choosing Interest Only Loan Payment Scheme

2007-03-08 10:33:40

( Financial )



Times are hard and there are people who can’t manage finances properly and end up borrowing money. The act of borrowing money is not solely limited to this situation though and more often than not the need to borrow money is substantial.

Some borrowers need to finance hospital bills while some need it for a new house or even to finance a car. Regardless of the reasons for which people borrow money, the end result is the same. These people will have to pay lenders monthly for part of the amount borrowed and the monthly interest rate charge calculated based on the annual percentage rate and the principal.

There are a number of payment options available in the money-lending industry, one of which is the interest only loan payment. This type of payment scheme is made available to interest only mortgages, which require the borrower to forego the payment for the principal. The debtor is only asked to pay for the interest for a specific duration of time. With the interest only loan payment, the original debt remains unpaid every month because the interest is the only payment being made.

These intrest only loans are most suited to people who are would like to postpone paying fully amortizing loans for the moment. For the meantime these people opt to pay only loans interest charges, thus the term interest only loan payment.

Interest only mortgages and other interest only loans are the only loan types that have an interest only loan payment scheme. If you are interested in this loan type however, don’t be fooled by any false information or your own misinterpretation. There are interest only loan payment schemes that have adjustable-rate mortgages rather than fixed interest rates. Beware of such because the rate at which the interest rises may be too high and too frequent, and you’ll end paying so much more. So be informed and ask your mortgage company about such necessary details.


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