Deferred Interest

Deferred interest is a type of interest that is not paid immediately but is instead added to the principal balance of a loan. This means that the borrower will pay more interest over the life of the loan, but they will also have a lower monthly payment. Deferred interest is often used on loans with low interest rates, such as mortgages, as it allows borrowers to afford a larger loan amount.

There are two main types of deferred interest: simple interest and compound interest. With simple interest, the borrower only pays interest on the principal balance of the loan. With compound interest, the borrower pays interest on the principal balance as well as on any interest that has accrued. This means that the interest rate on a loan with compound interest will increase over time.

Deferred interest can be a good option for borrowers who are short on cash but who expect to have a higher income in the future. However, it is important to be aware of the fact that deferred interest will increase the total cost of the loan. Borrowers should also make sure that they understand the terms of their loan agreement before signing it.

Here are some additional details about deferred interest:

* Deferred interest is most commonly used on loans with low interest rates, such as mortgages.
* Deferred interest can increase the total cost of a loan by thousands of dollars.
* Borrowers should make sure that they understand the terms of their loan agreement before signing it.