You can somewhat compare the interest- only loan with revolving credit or personal loan. The interest-only loan is seen more as responsible lending than the other two. There is therefore a big difference in the loans. On the one hand, it would be logical that there would not be so many different types of credit. With revolving credit and a personal loan, it is usually agreed in advance for what the money should be used for. With a repayment-free credit you can do this yourself
determine. The name owes the interest-only loan to the fact that a certain amount does not have to be repaid every month or year. You only pay interest. This is usually lower, but even if it is the same. With an interest-only loan you pay less interest per month.
Period for the interest-only loan
Most people take out an interest-only loan for a period of 5 years. You then only have to start paying off after 5 years. If necessary, you can also agree on a different time frame in advance. Most interest-only loans are transferred to revolving credit after the agreed period.
It is, therefore, better to pay off in order to prevent high-interest rates and mandatory repayments. Do you want to prevent your interest-only loan from being changed into revolving credit? Talk to the lender. It is possible that the interest-only loan can be extended. The lender will look at your current situation and based on this information you can be eligible for a renewed interest-only loan.
What is the maximum loan amount?
Before you want to take out a loan you often want to know how much you can take out. The lender will want to know different details for this. First, they need your personal information. The lender also wants to know how many monthly costs and income you have to be able to agree on a responsible loan amount. It is namely that
you have enough money left over every month so that the interest due can be paid. The most important data is, therefore, the difference between expenses and income. The lender himself will also assume relationships between mortgage payments and income. In the end, it comes down to being able to borrow based on how much money you have leftover each month.
If you were to earn more money in the future, credit is not unwise. Conversely, if you lose a job or something similar, an interest-only loan can put you in serious trouble.