Heard of interest only loans?

They do serve a purpose but only in certain situations.

An interest-only loan is one that during the interest-only period (typically 5-10 years), your repayments only cover the interest owed to the bank, without paying any of the principal off the loan. While this will result in lower repayments compared to a standard principal and interest loan, your loan balance won’t decrease throughout this period. After the interest-only period, your repayments will change to principal and interest, which will mean increased repayments after this period.

An interest-only loan will only be appropriate in certain situations, but can be very beneficial under some circumstances.

Some circumstances in which you could consider an interest-only loan:

1️. You were purchasing a property for investment purposes.
2. You, for whatever reason, need your repayments to be lower than they would be with a principal and interest loan (again, depends on your situation – you should always borrow within your means).
3. You want to free up your cash flow to invest elsewhere.

If you think an interest-only loan could be what you’re looking for, let us know and we’ll point you in the right direction.

7Wealth Pty Ltd ABN 44 609 210 246, is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706
This blog contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. If you decide to purchase or vary a financial product, your financial adviser, and other companies within the AMP Group may receive fees and other benefits. The fees will be a dollar amount and/ or a percentage of either the premium you pay or the value of your investment. Please contact us if you want more information.