A loan that requires a balloon payment is:
- fully amortized
- not fully amoritized
- also known as a seller carryback loan
- contingent upon buyer financing
Explanation: The answer here is “a” – “not fully amortized”. A fully amortized loan, by definition, is a loan in which all of the payments to pay off the loan are of equal value – so, for example, if you were paying off a $6,000 loan by paying $500 every month for a year then that loan would be fully amortized. A balloon payment, by definition, is any payment more than double the usual amount. Thus, a loan that requires a balloon payment (also known as a balloon loan) is not fully amortized.