Glossary
Glossary of terms and acronyms related to Australian banking, finance and investments.
Interest Only Loan
An interest only loan allows you to pay only the predetermined interest rate for part of the loan term, leaving the principal unchanged. Many mortgages offer an interest only plan for the first few years of a loan to attract borrowers. After the interest-only period, you can either pay off the principal in full or amortize it for the rest of the term. The interest only loan works for borrowers want to reserve or purchase property but are not ready to make standard repayments just yet. Since the lender assumes some risk, the rates are usually higher on an interest only loan.
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