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Bullet Loan

 

Any loan that requires a balloon payment at the end of the term and anticipates that the loan will be refinanced in order to meet the balloon payment obligation.

Investopedia Says:
These loans are riskier because the homeowner's equity in the property doesn't increase over time.

Related Links:
Learn how the various reasons for doing it can mean the difference between financial prudence and ruin. Mortgages: The ABCs Of Refinancing
This may be the biggest debt you'll ever incur. Learn why you should retire it sooner rather than later. Paying Off Your Mortgage


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Banking Dictionary: Bullet Loan
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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.

Real Estate Dictionary: Bullet Loan
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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.

 
 
Learn More
Evergreen Loan (in banking)
Interest-Only Loan (in banking)
Bullet loan

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Investment Dictionary. Copyright ©2000, Investopedia.com - Owned and Operated by Investopedia Inc. All rights reserved.  Read more
Banking Dictionary. Dictionary of Banking Terms. Copyright © 2006 by Barron's Educational Series, Inc. All rights reserved.  Read more
Real Estate Dictionary. Dictionary of Real Estate Terms. Copyright © 2004 by Barron's Educational Series, Inc. All rights reserved.  Read more