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This type of loan has been very popular recently. Is it something that you should consider?

There are now many lenders offering minimum payment options. For the borrower it is critical to understand how these loans work before they sign up for them. Here are some items to consider:

1. Different payment level options

The basic feature of these types of loans is that a customer has a choice in the amount of payments they make for an initial period. This can give you several different levels of payments you can make each month. For example, you can pay the loan at the 30 year loan level, at the interest-only level, or even less than interest only.

2. Minimum payment term

The minimum payment in the beginning can be less than interest-only. Anytime you choose to make this payment, the difference between your payment and the interest-only payment is added to your principal. For example, if the interest-only payment is $2,000 and the minimum payment is $1,700, if you choose to make the minimum payment then $300 will be added to your principal ($2,000-$1,700-$300). Read the rest of this entry »