Bullet Loan

Also known as a balloon loan, this type of loan is usually for a mortgage but can be for any other type of credit.

You might have low monthly payments (or even none) for a certain period of time, but at the end, or “maturity date,” you need to pay back the entire loan with interest.

Perhaps you don’t have the money to take out a large mortgage at the moment, but you are expecting a large inheritance, or to strike oil in your backyard. Bullet loans are frequently used by builders, as they can wait to repay the loan when they have built and sold all their houses. Then they can take out a new loan at hopefully lower interest rates, using the land and houses as collateral.