Which loan structure is also known as a balloon loan?

A balloon loan, often referred to as a bullet-structured loan, is characterized by having a large final payment, or "balloon," that is due at the end of the loan term. This structure typically involves lower regular payments during the life of the loan, often only covering interest, which makes the initial payment burden lighter for borrowers. However, since a significant lump sum is required at the maturity of the loan, it can present a challenge if the borrower has not planned for that final payment.

In contrast, debentured loans usually involve a long-term fixed interest rate issued by companies, and while they bear periodic interest payments, they do not necessarily have the balloon payment feature. A self-amortizing loan requires periodic payments of both principal and interest, eventually leading to the total balance being paid off over the life of the loan, which eliminates the balloon payment aspect. Term loans involve fixed repayments over a specified duration, similar to traditional loans, with no significant balloon payment due at maturity either.

Therefore, the description of a balloon loan aligns closely with a bullet-structured loan, as both terms emphasize the large final payment structure inherent in these types of financing arrangements.