What Is Difference Between Amortized And Interest Only?
When you have a financial crunch, things never seem to come on track for a long time, but if you get an auto title loan, most of your troubles can be met with instant cash. It helps you get a grip on the financial problems and assist you to tide over the emergency. However, depending upon your current financial situation, you can either opt for an interest only title loan or an amortized loan.
Before you take an auto title loan, you need to first understand about the two types of available loans. One is the interest only loan where in you first pay up all of the interest upfront and the fully amortized loan wherein the repayments that you’ll make shall include the interest and principal every month.
Though the auto title loan services work with the customer to custom tailor the repayment program, knowing more about the types of loans can help decide the best repayment methods. The fully amortized loan gives you the freedom of repaying the total principal and interest in installments over a specified time. All of the monthly repayments are in equal amounts and part of the payment is for the repayment of the principal and the rest for the interest.
When you select the interest-only loan, the monthly installments are first used to repay all of the interest and once that is fulfilled only then the monthly repayment is used to pay off the principal. It is quite similar to the credit card payment system and is perfect for those looking for a short term loan for a few days or weeks. The downfall of this loan is that you pay off the complete interest for the full-term of the loan before you start paying off the principal. Conversely, with an amortized loan, you are paying both principal and interest in equal monthly payments.
If you intend on taking the loan for a few months, the fully amortized loan might be a better solution but if you just need the loan for a few weeks, interest-only loan works better. Talk with the title loan service representative from Auto Title Loans USA and discuss both the options to know the best option for your financial requirements.