Finance
What is an interest-only loan and what risk does it carry for Nevada borrowers?
AA loan where payments include only principal; no interest risk
BA loan where payments cover only interest for an initial period; the principal is not reduced and a payment shock occurs when principal payments begin✓ Correct
CA loan guaranteed to have below-market interest
DA Nevada Housing Division program for low-income buyers
Explanation
An interest-only loan requires only interest payments for an initial period (5–10 years). During this time, the principal balance does not decrease. When the interest-only period ends, the borrower must begin paying principal, often resulting in a significant payment increase ('payment shock').
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