There are banks where you can take out loans that are free of interest. If you have an amortization-free loan, this means that you only pay interest on the loan for a period that you have agreed with the bank.
For example, it may be that you take out a mortgage loan that is free of amortization. If that is the case, you will only pay interest on the house until the day you sell it when the bank will demand payment for the loan. For that, you should know that an amortization-free loan will also be repaid sometime in the future.
If you take out a regular unsecured loan that is free of amortization, you do not have to repay anything at all for a number of years. How many will you and the bank reach in common. Then when the repayment-free period is over, it’s time to start repaying the loan or renegotiating it.
Why an amortization-free loan
Not repaying the loan means that you put those costs ahead of time. As a result of not repaying anything, you will not have to pay any high costs each month as your loan is interest-free, since you only pay interest. So you may be wondering if you think it is a good idea to postpone the repayment of the loan to get a lower monthly cost in the beginning. For example, this could be suitable if you currently have an economy that is not the strongest but that you will be much better in the future.
Mortgage-free loans risk becoming more expensive
One thing that is very important to remember is that an amortization-free loan risks becoming more expensive overall. This is when you pay interest on the entire loan during the entire loan period. If you amortise on a loan, the loan will in total be smaller all the time, which means that interest costs also fall.