Interest-only loans, sinking funds and comparison rates with fees

What this note covers

1. Interest-only loans: the balance that never moves
2. Why anyone uses an interest-only loan, and what it really costs
3. Sinking funds: saving up to repay the principal
4. The combined package: interest-only plus sinking fund versus principal and interest
5. Fees, charges and the comparison rate
6. Choosing between two loans, and stating the recommendation
7. How this topic is examined in the SACE Stage 2 paper, and what separates a top answer

7 sections · 12 key terms & formulas · 6 common mistakes