Single-payment Loan vs. Installment Loan

A single payment loan ? I have to admit that I haven’t heard that term in quite a while. These are usually bank products such as a construction loan or even a business loan. The ones I’ve seen have been short term such as 6 months or 12 months duration. At the end you would pay the accrued interest along with the principal balance. In the case of a construction (Interum) loan, when the house is complete, it is usually refinanced into a permanent loan. Even more common would be the builder paying the loan off through the sale of the home. These loans would also be considered balloon loans because of the balance being due in one lump sum payment.

Most balloon loans will require some regular payment followed by a larger (balloon) payment due at a predetermined period of time. For example a 30 year fixed rate loan with a 5 year balloon would have normal payments based on a 30 year amortization period, but the remaining principal balance would be due at the end of 5 years.

Both of these would be considered as installment loans, not revolving. An installment loan refers to a specified period of time, not an open ended loan such as a credit card which is re-used again and again.