What type of loan requires only interest payments during the loan term, with the principal due at the end?

The type of loan that requires only interest payments during the loan term, with the principal due at the end, is known as a straight loan. In this structure, borrowers pay only the interest for the duration of the loan, which means they have lower monthly payments initially. At the end of the loan term, the borrower must pay back the principal amount in one lump sum. This type of loan is often seen in situations where borrowers want to free up cash flow while in the loan period, allowing them to invest elsewhere or manage short-term financing needs.

In contrast, an amortized loan involves regular payments that include both principal and interest, spreading out the total repayment over the life of the loan. A balloon loan also consists of lower initial payments but typically requires a larger final payment at the end of the term, which may not fully be just the principal. An equity loan, often a home equity loan or line of credit, allows the borrower to use the equity of their property as collateral but does not fit the description of making only interest payments during the loan term.