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  • Interest Only Loan Simplified by RAMS


    An Interest Only loan allows the borrower to repay only the interest (as opposed to the principal amount and interest) for a set amount of time as agreed with their provider.


    Greater Together is helping you understand interest-only loans.

    With a standard principal and interest loan, part of the principal, the original loan amount, is paid off with each repayment.

    With an interest only home loan, for an agreed period of the loan, the borrower only repays the interest.  Once the interest only period ends, the borrower is then required to pay principal and interest repayments, for the remainder of the term, to ensure the loan is repaid.

    It's worth considering that these repayments will be higher, which will result in more interest being paid over the life of the loan.

    People with irregular income may also prefer an interest-only loan, so they can pay down the loan, or offset lump sum payments, when it suits them, rather than paying a regular monthly amount.  However the loan must be repaid in full within the loan term.  

    If you're an owner occupier, with a steady income, a principal and interest loan may be suitable, as you'll pay less interest in the long run, when you make the minimum required payment over the life of the loan.

    Helping you understand interest only loans.  

    It's another reason we're greater together.

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    About the author

    • Raymond

      Raymond A Ram is the RAMbassador for RAMS Financial Group. Raymond works with the RAMS team to bring simple, helpful and expert information on home loans and savings accounts to life with his down to earth and cheeky personality. He enjoys seeing everyday Australians turn their dreams of saving for a goal or getting into a home a reality. 

      Growing up in Goulburn, NSW, Raymond was brought up with good old-fashioned Aussie values of hard work and a fair go. It soon became apparent that Raymond wasn't content for the conventional path of grazing, producing the very best wool, and finding a nice sheep to settle down with. So it wasn't long before his passion for performing and his talent as a likeable larrikin shone through - landing him a few roles such as 'RAMlet'. He was even tipped to play RAM-bo at one point but chose to become star of the small screen instead as RAMbassador for RAMS. He now finds this role so much more rewarding.

      Contact your local RAMS Home Loan Centre about your home loan options.

      Raymond A Ram

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  • Disclaimer:

    The information here is of a general nature only and is not intended to constitute financial or tax advice. You should consult your professional adviser, accountant or taxation expert for advice specific to your personal circumstances.

    The views and opinions expressed in this article are those of the author alone and do not necessarily represent the views or opinions of RAMS Financial Group Pty Ltd ABN 30 105 207 538 (RAMS),  Westpac Banking Corporation ABN 33 007 457 141 (Westpac) or their related bodies corporate. This article is strictly for information purposes only and neither RAMS, Westpac nor any of their related bodies corporate make any representation as to the accuracy or completeness of the information in this article or endorse the views expressed in it.