Interest Only Loan Rate - Is This the Best Option for You?
Saturday, February 28th, 2009 Subscribe To Our Feed
The banks know many ways of earning money by feeding the hungry consumers with various kinds of loans. These are targeted at customers that are in dire need of money just avoid getting broke. Interest only loan is a good example of this.
Just Pay the Interest - Attractive Solution?
As evident from the name, the interest only loan requires you to pay just the interest every month. From the look of it, this is the best alternative in deep financial crisis and is the reason many may opt for such loans. If you have a poor financial capacity staring you in the face, there is nothing much you would reason before getting a loan.
This is an attractive solution, if you want to get the creditors of your back. Go to a bank an take an interest only loan and only worry about one single problem. It can be a huge relief to several people who have to deal with nagging creditors everyday. Unfortunately, this is not as rosy as it seems.
Instant Relief or Not?
Typically, such loans are most attractive to people that are in deep financial problems. At such times your reasoning can get muddled and very near sighted. For example an interest only loan for ten thousand dollars would give you instant relief from the economical stress that you are going through.
This looks simple, but it can actually be a problem for you. At 10% interest rate, if you get a $10,000 loan, you pay $10,00 yearly. Now this is not a huge loan, but the principal amount is not touched, which means you will keep paying the interest forever.
Short terms benefits superseding long term impacts are not new, especially when the situation is very bad. If this type of loan seems to be the perfect solution for you, it probably is not and you are missing something. Think carefully about that.
However, the interest only loan is not always bad. There are situations where it can be a good economical tool too. However, there may be other options too that you may want to explore before zeroing on the interest only loan. If you have a short term crisis and need some fast, no-frills economical solution, the interest only loan may be a great alternative.
