With an Interest Only Loan, most borrowers can qualify for a larger loan amount because the payments are lower on interest only loans. Interest Only Loans are popular with borrowers who plan to sell or refinance in a few years. So what is an Interest Only Loan, it doesn't mean you will never pay principal on your loan. An Interest Only Loan has what is known as an interest-only payment option attached to your mortgage loan. The option to pay interest only will last for a specified term, typically 5 to 10 years.