What's a deferred interest loan?

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Michael --- a "deferred interest" loan is better known as a "negative amortization" or alternately, a "reverse mortgage" loan. This means that any payments that are being made are not sufficient to cover the interest (and obviously are not covering any principal). This results in the loan amount going up each month. In a reverse mortgage situation - this continues as long as the loan is in effect (there are NO required payments). In a "negative amortization" loan -- which are very difficult, if not impossible to find -- there would be a set period during which this could take place, before a normal amortization process would begin. Usually this would be 5 - 10 years of deferred interest, after which the new loan balance would be converted to a fully amortizing loan payment over the remaining 20 - 25 years.

A deferred interest loan is one where your payments are lower than the interest due for that month, which means the principal balance increases, instead of decreasing.

Who the heck is offering those these days???

That's the type of loan that got a lot of Californians in trouble. The monthly payment does not pay the full amount of interest owed each month. The deferred interest is tacked onto the loan balance and eventually must be paid. Typically in 5 years the loan is re-cast to higher balance including the deferred interest and the payment changes to amortize the new balance. Because the loan is negatively amortizing (rising instead of falling) we also call these loans negative am loans.

Deferred interest loan simply implies that the interest portion of the loan payment is not due until some scheduled time in the future.