What is a Partially Amortized Loan?

What is a Partially Amortized Loan?

A partially amortized loan is a type of loan where the payments made during the term do not fully cover the entire principal amount, resulting in a remaining balance, called a balloon payment, due at the end of the loan term. This means that the borrower pays interest and part of the principal over the loan term through regular installments, but will need to pay off the remaining principal as a lump sum at the end of the term. Partially amortized loans can be beneficial for borrowers expecting higher income in the future or planning to refinance or sell the asset financed by the loan before the balloon payment is due.

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