A loan for which a borrower is not required to pay any interest. However, a borrower will have to repay the principal amount (i.e., the par value of the loan). Such a loan is usually extended by governments or government agencies (and hence are considered government regulated loans), with no interest or administration fees. Interest-free loans are granted based on specific conditions relating to resources, eligibility, subsidizing specific sectors in the economy or society, etc. An example is a loan extended to acquire a main residence or financing certain requirements.
Types of interest-free loan include interest-free education loans, interest-free home loans, interest-free travel loans, interest-free loans for business, interest-free car loans, government interest-free loans, etc.
It is also known as a no-interest loan, a zero-interest loan or for short as an IFL.
Comments