When you pay off the principal and all of the interest at one time at the maturity date of the loan, we call this type of loan a(n) ________.
A) amortized loan
B) interest-only loan
C) discount loan
D) compound loan

Question

Quizplus · Accepted Answer

Paying off the principal and all the interest at the maturity date of the loan is characteristic of a discount loan, where the interest is deducted upfront from the principal. An amortized loan, on the other hand, involves paying off the principal along with interest over the life of the loan in installments. An interest-only loan refers to a loan where the borrower pays only the interest for a specific period, after which the principal is repaid in installments. There is no such thing as a compound loan as compound interest can be applied to any loan.

When You Pay Off the Principal and All of the Interest