Interest-Only Loans vs Principal & Interest Loans

Interest-only loans vs principal and interest loans: The pros and cons

So, you’re ready to start your investment journey.

You’ve heard so much from so many people about how investing is the key to financial freedom. It’s how you build generational wealth…

And you want to get started.

You head online to look at some loans and find that there are so many options. There’s a huge amount of information to unpack before you choose the loan that’s right for you.

However, it all starts with one question…

Do you go for a principal and interest (P&I) or interest-only loan?

Each has its pros and cons.

Principal and Interest

With a P&I loan, every repayment that you make takes a small chunk out of the loan’s principal....

...That’s the first benefit as it means you’re making active progress towards reducing the loan amount.

You’re going to have to do this eventually, even if you get an interest-only loan. The key question is whether you should do it from the start.

We’ve found P&I loans tend to come with slightly lower interest rates.

But despite that, they’re going to have a major impact on your cash flow if you use them from year one.

The loan’s going to cost you more in repayments simply because you’re adding the principal on top of the interest.

Interest-Only

As the name says, this type of loan sees you paying only the interest for a set period of time.... 

...After that, it reverts to a P&I loan.

The great thing here is that you reduce your immediate expenditures. 

This means you have more control over your cash flow immediately after buying an investment property.

However, you’ll also have a shorter amount of time to pay off the principal when your loan reverts to P&I.

That’s where Dashdot’s high-performance property strategy comes in.

We can help you find high yield and high growth properties that offer value adds.

That’s going to help you build even more equity during the interest-only portion of the loan...

...So when it reverts to P&I, you’re in a much better position.

We want to help you to leverage this strategy.

Take our 15-second application to find out if we’re a good fit.

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