The Difference Between An Interest Only Loan And A Principal And Interest Loan

When borrowing money be it for personal reasons, for investment or for a home you need to consider the many options available to you. If you are taking on the daunting task of “going it alone” then you may need to do your research first however if you are using a financial broker or a mortgage broker you will find the answers to your questions there.One popular loan scenario is a interest only loan and a principal and interest loan. These loans are quite simple to explain and there are different circumstances that a principal only loan would be applicable.Interest only (IO) loans are simply that. You only pay the interest on the money borrowed. The interest only period is usually set by the lender depending on the product (ie loan option) you choose. At the end of the IO period the loan reverts to a principal and interest loan.Principal and Interest loans ensure you are paying not only the interest on the loan but a portion of the loan principal. So why take out an Interest Only (IO) loan? The reasons can be many so here is a couple of reasons that may give you cause to take out a loan at interest only.Financial Hardship: When things get tough and you are struggling to meet your financial commitments your financial adviser, mortgage broker or accountant may recommend an IO loan allowing you to get bug on your feet again.Investment: Many financial planners and accountants will advise to use an IO loan when purchasing investment properties to minimise your outgoings and to maximise the tax advantages. A mortgage broker will advise you of this option but recommend you speak with your accountant before proceeding.A principal and interest loan is the most popular of loan options for owner-occupied homes. These loans allow you to pay off your home (principal) and the interest with each repayment. The disadvantage of using an interest only loan for an owner occupied loan would be that at the end of the interest only period (normally 5 years) you would have to make higher repayments at principal and interest than if you had had been paying the principal and interest from the beginning of the loan term.Here is an example of your repayments on a IO loan during the IO period and after. We have used a fixed rate for this example however lenders may offer an option of variable or fixed rates:Home loan: $330,000 Loan Term: 30 years Interest rate: 6.5% fixed for 5 years Monthly interest only repayments: $1,625.00. After 5 years with 25 years still on the loan: Monthly principal and interest repayments: $2,025.62. Compare this with a loan of the same interest rate, same loan term and paying principal and interest: $1,896.20 monthly.When considering an interest only loan it is important you have a chat with your accountant. Whilst a financial broker or a mortgage broker can provide advice your accountant will be able to advise you on your tax implications if any and also provide a second opinion.

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Business Finance Training and Effective Business Solutions

Business finance training refers to programs that teach individuals how to handle various financial duties. Finance training is similar to finance tips in that both help business owners make better monetary decisions, but training programs offer a more detailed explanation of finance strategies. Training programs vary in price and can be used by the owners and employees of a business.The most basic business finance training provide information on budgeting, preparing financial statements, managing cash flow, strategizing, forecasting, improving performance, and applying basic procedures and concepts to more effectively manage a business. These programs are recommended for new business owners to help them understand standard business practices. Once these basic methods are mastered, more specific financial training may be looked into.Advanced business finance training delves more deeply into a certain financial procedure or concept, usually at a higher cost than basic programs. Advanced programs may teach business owners how to set up effective business models, make decisions based on quantitative analysis, manage and control accounts, practice due diligence, measure productivity, and strategize concerning mergers and acquisitions.Taking part in any kind of business finance training gives a business owner the resources to make more intelligent business decisions that result in increased productivity and profits. Many different types of courses are available either online or at a specified location. Some programs may even offer the option to train at the business. Taking into consideration the needs and abilities of a business is the key to finding the best business finance training.A business finance solution generally refers to methods of funding and maintaining the finances of a business. Most solutions involve ways of obtaining working capital, but others also offer ways of protecting and increasing that capital.To obtain working capital, business owners look to finance solutions that offer funding by several different means. The most common means are loans and financing. Asset-based loans use a business’s assets, such as inventory and equipment, as collateral. A business may also opt for a property loan in order to acquire commercial space. Invoice financing, such as factoring, involves liquidating or selling a business’s accounts receivables in exchange for quick funding. Some businesses look to trade financing to supply their inventory. The business will tell its financer the amount and cost of goods needed, and the financer will pay for the goods. The business then repays the amount financed over a specified period of time.Most companies that provide business finance solutions also offer ways to protect and increase a business’s capital. Credit protection safeguards a business from daily risks, such as customers not paying on time, so that the business does not suffer incredible losses. This makes it much easier for the business to borrow money in the future, and it protects the balance sheet. A finance solution may also offer business insurance plans that increase the stability of a business. The most common types of business insurance are employee and public liability, car, property, and health insurance. These business finance solutions are designed to protect businesses against potential losses.

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