At the other end of the spectrum, an acquaintance who has 50% equity in her modest home and a good credit record has applied under a government home affordability program to refinance her interest-only loan, due to reset in two years.

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That's also why so many taxpayers actually ask the government to withhold more money from their paychecks than they need to--effectively paying their taxes upfront while giving the government an interest-free loan--because it's the only way they can be sure they'll have enough to pay the IRS when April 15 rolls around.

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Economists are warning of the rise of zombie companies - struggling firms that can just about afford the interest payments on their loans - and zombie households, those on interest-only mortgages, yet unable to pay off the loan itself.

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Issued during a period of historically low interest rates--for adjustable-rate mortgages, they clocked in below 4% in 2003--many mortgages allowed buyers to pay only the interest on a loan for a certain period of time, or pay down very little on loan principal.

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Regarding such a switcheroo as "income" is like making an interest-free loan and then telling yourself, as the debtor pays back only your principal, that you are earning a generous return on your money.

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In 2009 the authority issued a two-year repayment holiday, which meant that during that time the club was only required to pay the interest on the loan.

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