What is a unique feature of a partially amortized loan?

A partially amortized loan is characterized by its payment structure, where the borrower makes regular monthly payments covering both interest and a portion of the principal, but not enough to pay off the loan completely by the end of the loan term. As a result, a balloon payment, which is a large final payment, is required at the end of the term to cover the remaining principal balance.

This type of loan can be appealing because the monthly payments can be lower compared to a fully amortized loan, allowing borrowers to better manage cash flow during the term. However, the requirement of a balloon payment means that the borrower must be prepared for a significant financial obligation once the term ends, often requiring refinancing or a significant cash source to meet that payment.

Other options do not accurately describe a partially amortized loan. A fully amortized loan would require full payment of principal throughout its term, a fixed interest rate typically applies to most standard loans irrespective of amortization, and variable payments are associated with adjustable-rate mortgages rather than a partially amortized structure.