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Interest Rate |
The interest rate (e.g. 10.5%). A rate that is paid or charged for the use of money. Interest rates are usually charged based on an annual percentage of the principal. For example, if a lender charges an interest rate of 10% on a loan of $1000, the total interest charged in a year is $100 for this $1000 loan.
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Type of Loan |
Amortized Loan is a repayment plan that consists of both principal and interest. Payments are usually divided into equal amounts for the length of the loan.
Interest Only Loan is a payment plan that covers only the interest amount of the principal. With Interest Only loans, the monthly payments do not reduce the principal balance. The principal is repaid at the end of the loan term.
Partially Amortized Loan is a repayment plan whereby the loan is not fully amortized so that at the end of the loan term, there is a balance of the principal that needs to be paid. Sometimes this balance at the end of the loan is referred to as a balloon payment.
Principal and Interest at Maturity is a repayment plan that is a single payment due at the end of the loan period. The payment at the end of the loan is a combination of both principal and interest. This type of loan is common for agricultural loans or loans where the cash is not available to pay off a loan until the end of the term.
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An amortized loan has regular, equal payment through out the term of the loan.
An interest only loan has regular payment of interest only, with the principle and
due with the last payment.
The principal and all interest are due at the end of the loan (Maturity Date).
Partially amortized loans have fixed payments during the term of the loan, with
any remaining principle due at the end of the loan.
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