Interest only loans and negative amortization. The myths and facts
There are some misconceptions associated with interest only loans. The most common misconception is that all interest only loans come with negative amortization. In fact, most interest-only loan programs are available with short-term fixed rates and not negative amortization.

How can you measure your personal risk level?
Your risk in any interest only loan depends on a number of factors.

• You should opt for an interest only loan only if you are sure of an increase in your income level in near future. In case you are not sure of this, it is advisable that you consult an expert.
• You should be a bit cautious while deciding on the long term payments. For example, shorter fixed-rate terms and then adjustable loans for the remaining portion of 30 years is a bit risky. Here's what happens in such cases: considering your loan has a 30-year term, once the interest-only period ends, you have the remaining years to fully amortize the loan balance. The risk is greater if you have paid nothing towards principal during the interest only period.
• More the amount of principal you pay back during your interest-only period, lesser the risk of having to make extra payment once the fixed tenure ends. However, some risks are still there as many factors go into determining your payments when the time comes, including the prevailing interest rates, and the possibility of rates to be lowered at the end of the interest only period are plenty.

Consult with an expert to decide which loan is best for you and the amount you should pay back for minimum risk.