A constant payment loan with payments consisting of principal and interest is called

A constant payment loan with payments consisting of principal and interest is called

• A. Amortized loan
• B. Balloon loan
• C. Revolving line of credit
• D. Interest-only loan

Answer: (A)

The main idea is a loan where every payment is the same and each payment includes both interest and principal, with the balance fully paid off by the end of the term. That describes an amortized loan. Because payments are split between interest and principal, the interest portion is higher at the start and declines over time while the principal portion rises, so you steadily reduce the loan balance until it’s gone. This differs from a balloon loan, which leaves a large final payment because the regular payments don’t fully amortize the balance; a revolving line of credit, which is a flexible borrowing arrangement with variable balances and payments; and an interest-only loan, where payments cover only interest and do not reduce the principal.

The main idea is a loan where every payment is the same and each payment includes both interest and principal, with the balance fully paid off by the end of the term. That describes an amortized loan. Because payments are split between interest and principal, the interest portion is higher at the start and declines over time while the principal portion rises, so you steadily reduce the loan balance until it’s gone. This differs from a balloon loan, which leaves a large final payment because the regular payments don’t fully amortize the balance; a revolving line of credit, which is a flexible borrowing arrangement with variable balances and payments; and an interest-only loan, where payments cover only interest and do not reduce the principal.