loan that has a one-time payment of principal and interest at its termination. A bullet loan is similar to a balloon maturity loan, with the important difference that a bullet loan, unlike a balloon loan, has no obvious source of repayment. To pay off the bullet loan the borrower may have to refinance at the current rate, liquidate assets, or sell collateral.
typically a loan with a 5- to 10-year term and no amortization. At the end of the term, the full amount is due.
term loan repayable in one balloon payment. Also called balloon maturity loan, although the concept of no amortization is essential.
typically a loan with a 5- to 10-year term and no amortization. At the end of the term the full amount is due.
Example: Barry borrows $1 million for 5 years at 10% interest to buy commercial real estate. If he can't repay the loan or refinance it when due, he will lose the property.
