Describing a loan structure where the borrower pays only the interest charges for a specified period, without reducing the principal balance. After the interest-only period ends, payments typically increase to include principal repayment.
This compound term emerged in modern banking during the 20th century, combining 'interest' from Latin 'interesse' (to be between, to matter) and 'only' from Old English 'anlic' (one-like). The concept gained prominence during real estate booms when lenders sought to make properties more affordable initially.
Interest-only loans are like renting money instead of buying your way out of debt - you're essentially paying for the privilege of owing the same amount forever! They became notorious during the 2008 housing crisis when borrowers discovered their payments would eventually skyrocket.
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