Interest Only Finance, Explained…

Interest Only Finance, Explained…
20th February 2020 Leah Rolfe

Interest Only Finance, Explained…

Interest only finance. A loan may be required for 24 – 36 months on occasion. You may have another source of funding maturing in the near future, a house sale or a bonus for example. Although a Regulated Hire Purchase agreement enables the flexibility of full or partial settlement the monthly payments could be higher than you wish to budget for. In these circumstances and provided the loan to value (LTV) ratio is suitable, we can now offer interest only finance.

What does Interest Only Finance mean?

Literally what it says. It allows you to repay the interest charge per month without the requirement to repay the capital element of the loan.

How does it work?

The loan is constructed using a suitable deposit level and the capital is deferred until the end of the agreement. Each month only the interest charge is paid on your Direct Debit.

Why would I consider Interest Only Finance?

If you have a short term requirement for a loan, say a maximum of 24/36 months, and have a good amount of equity to remain in a car, to be refinanced or to add to a purchase then interest only enables much lower monthly payments. You must ensure though that you have a future plan to deal with the capital element of the loan when it is due. Remember time flies and it comes around quickly!

This facility can be applied to refinance and purchase agreements and be available for almost any valued asset.

Interest only finance sounds interesting but I’d like to know a little more about it…

We know finance isn’t always easy to understand. Give us a call and we’ll do what we can to help.