Paying interest only is an option some companies
offer when you’ve fallen behind in your loan payments.
Interest only loans have also recently made their way onto
the market. But is this really a good idea? And how does it
work?
Actually, your lender may allow you to skip a loan payment
if you find yourself in financial distress. The option won’t
typically be available if you wait until past the due date
to make the request. As soon as you realize you’re likely
unable to meet your next scheduled payment on time, contact
the lender. Remember that the interest is typically the bulk
of your payment at the front end of the loan so an interest
only payment may not be a significant savings. Also remember
that the interest only payment option won’t be granted
often, so use it only when you’re truly in need.
The interest only loans that have cropped up over the past
few years are a good idea in some situations. If you live
in an area with escalating market values, you can purchase
your home, pay only the interest due on the note, and then
sell it to pay off the entire loan – sometimes with
some additional cash for your investment of time. Before you
decide that an interest only loan is right for you, remember
that you’ll never pay down the principal
and will always owe the full purchase price on your home.
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