Tennessee Real Estate License Exam Practice Question
A borrower who was making payments (principal plus interest) on a loan was required to make a balloon payment at the end of the loan. This was most likely a
Correct Answer: D
Rationale: A partially amortized loan requires regular payments of principal and interest, but not enough to fully pay off the loan by the end of the term, resulting in a balloon payment.
Option A, a fully amortized loan, involves payments that cover the entire principal and interest, eliminating any balloon payment.
Option B, a straight loan, requires interest-only payments during the term, with the entire principal due at the end, which is not the same structure as a balloon payment scenario.
Option C, a term loan, typically refers to loans with a fixed repayment schedule, which may or may not include a balloon payment. However, it does not specifically indicate the need for a balloon payment like a partially amortized loan does.
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