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Whats the difference between a principal and interest loan and an interest only loan?

April 26, 2017difference loan principal and interest

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Whats the difference between a principal and interest loan and an interest only loan?

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Principal and Interest means that you are required to pay the interest on the loan each month plus an amount that will repay your original loan off in the defined term (for example, 25 years). A principal and interest loan sees the amount borrowed reduce each month. With an Interest Only loan, you are required to pay only the interest each month. This means that the outstanding balance (the amount you have borrowed) will not reduce over time.