What is an essential feature of a self-amortizing loan?

An essential feature of a self-amortizing loan is that both principal and interest are paid off by the end of the term. This characteristic is fundamental because it implies that the loan is structured in such a way that consistent payments over the life of the loan reduce the outstanding balance until it reaches zero when the term concludes.

Self-amortizing loans typically have fixed payments that cover both interest and a portion of the principal, allowing borrowers to gradually pay down the debt in a predictable manner. This ensures that at the maturity date, the loan is entirely repaid, providing borrowers clarity on their repayment obligations and a path to debt freedom.

In contrast, other options present characteristics of different types of loan structures. Large lump sum payments or partial interest-only payments do not fulfill the self-amortization requirement. Additionally, no payments until maturity signifies a different arrangement where the borrower would need to make a large payment at the end, not an amortizing structure where payments are made throughout the loan's life. The correct answer emphasizes the complete repayment of the loan, aligning with the definition and function of a self-amortizing loan.