Many of us are familiar with the typical loan formulas: vehicle loans, mortgage for a property. But how many of us know the “Interest only” type of loan ? Not that many.
The reason is simple: banks generally do not inform you about the “interest only” loan.
These formulas are certainly more interesting for the borrower than they are for then bank. The idea of getting a loan and to only pay back the interest makes this option high-risk.
When you engage your bank trying to contract a loan, it offers you different financial options. You’ll find the fixed rate formulas, the formulas indexed to the CBI interest , and many others.
You need to get the loan that suits your needs and your solvency. But in the case you wish to get a short term loan, which is supposed to help you out in the event of a lack of a solvency for an imminent acquisition of a property, then the “interest only” loan of the bank is the ideal solution if you don’t have the necessary funds.
This option will help you to fulfill your acquisition projects and to give you a year, maybe two years, in order to sell an apartment, or wait for the term to your life insurance policy, or to receive help from a family member, or to get a heritage that will be used to pay back the capital that was borrowed.
In simple terms: an “Interest only” loan (with interest monthly payments) allows you to only pay the interest agreed-upon duration of the loan at the end of which you can repay all of the contracted capital.
During the contracted loan period you will be able to reimburse the contracted capital.
The Interest only loan has the advantage of adapting itself to all the different loan formulas that the banks offer, like, for example, the loans that are indexed to an interest rate or to foreign currency euro LIBOR.