Bullet loan

Bullet loan

In banking and finance, a bullet loan is a loan where a payment of the entire principal of the loan, [cite news|last=Howard|first=Bob|title=Insurers brace themselves for oncoming 'bullets.'|Publication=Los Angeles Business Journal|date=1993 April 26|url=http://www.thefreelibrary.com/Insurers+brace+themselves+for+oncoming+'bullets.'+(intermediate-term+...-a013927724|accessdate=2007-04-17] and sometimes the principal and interest, [See, for example, http://www.anz.com/edna/dictionary.asp?action=content&content=bullet_loan Edna Carew, "The Language of Money" (Financial Dictionary).] is due at the end of the loan term. Likewise for bullet bond. A bullet loan can be a mortgage, bond, note or any other type of credit.

The payment that is due at the end of the loan is referred to as the bullet payment or balloon payment.

Bullet loans are common, and usually referred to by other names; bullet loan is a generic and unofficial term. Many types of publicly-traded bonds and notes constitute bullet loans: the face value of the bond is payable at bond maturity, and only interest payments are due during the interim periods. Short-term bonds or notes which pay no interest are also a form of bullet loan.

Bullet loans should be contrasted with amortizing loans, where the amount of principal is paid down over the life of the loan. There is no requirement that a loan be a bullet loan or an amortizing loan; combinations of all sorts exist. For example, a loan may have a grace period during which no principal is paid; partial amortization during the remainder of the loan; and a bullet payment at the end of the loan that is some percentage of the original principal.

ee also

* Balloon payment mortgage

References


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Look at other dictionaries:

  • Bullet loan — A bank term loan that calls for no amortization. The New York Times Financial Glossary * * * bullet loan bullet loan ➔ loan1 * * * bullet loan UK US noun [C] FINANCE ► a type of loan whose principal (= amount borrowed) must be paid in one single… …   Financial and business terms

  • bullet loan — A name occasionally used to describe a promissory note used for transactions that do not require any principal to be repaid until the maturity of the note. Interest is usually due periodically prior to maturity. Most often used to describe loans… …   Financial and business terms

  • bullet loan — A loan in which the whole of the principal is repaid in a single final payment known as a bullet, although interest may be paid in interim payments. Compare: amortizing loan …   Accounting dictionary

  • 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. These loans are riskier because the homeowner s equity in the property doesn t… …   Investment dictionary

  • bullet loan — / bυlɪt ləυn/ noun US a loan which is repaid in a single payment …   Dictionary of banking and finance

  • Bullet Loan — (кредит с единовременным погашением) кредит, выплата полной суммы основного долга по которому происходит при его погашении …   Ипотека. Словарь терминов

  • balloon payment bullet loan — loan which is initially repaid at a low rate and then comes due in one large lump sum …   English contemporary dictionary

  • Bullet (disambiguation) — Bullet may refer to: * bullet, a metal projectile used in a gun * bullet (typography) (•), a solid typographic symbol; called a bullet point in the United Kingdom * Bullet (comic), a British comic published during the 1970s * Bullet (comics), a… …   Wikipedia

  • Bullet Transaction — A loan in which all principal is repaid when the loan matures instead of in installments over the life of the loan. Only interest is paid during the loan term. A bullet transaction may have two or more tranches, where the different tranches might …   Investment dictionary

  • loan — money lent at interest.A lender makes a loan with the idea that it will be paid back as agreed and that interest will be paid for the use of the money. Glossary of Business Terms Temporary borrowing of a sum of money. If you borrow $1 million you …   Financial and business terms

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