When considering a business loan, it's important to understand the difference between an amortized and non-amortized loan.
An amortized loan is a loan that is paid back in equal installments over a set period of time. Each payment includes both principal and interest, with the majority of the payment going toward interest at the beginning of the loan term and more going toward principal as the loan nears its end. This means that the loan is fully paid off at the end of the term.
A non-amortized loan, on the other hand, is a loan where the borrower only pays interest during the loan term and then pays the full principal at the end of the term. Non-amortized loans are also called "balloon loans" because the final payment is often much larger than the preceding payments, similar to a balloon expanding in size.
While non-amortized loans may seem attractive because of the lower monthly payments, they often come with higher interest rates and can be riskier for the borrower because of the large final payment. Amortized loans offer more predictable payments and can help borrowers better manage their cash flow over the loan term.
When considering a business loan, it's important to understand the differences between these two loan types and choose the one that best meets your business's needs. At Shield.Credit we offer both amortized and non-amortized loan options and can help you determine which option is best for your business. Contact us today to learn more.
