Interest Only-It's Just An Option

'Interest only' is just an option that is added to many loan programs. It allows a customer to determine when they want to pay the balance of a loan instead of requiring the payoff through amortization. It is a nice feature to add to a loan to minimize the required payment each month. Interest is what a borrower pays a lender as compensation for the use of the money over a specified period of time. An interest only loan requires a payment that pays the interest that has accrued on the loan, but with no principal reduction required for a specified time frame. Interest only products offer a way to lower monthly cash flow, but do carry some risk and must be evaluated to make sure they fit for the particular borrower. They are ideally suited for the borrower who can use the lower cash flow to maximize financial leverage by pursuing other financial opportunities.