BULLET REPAYMENT

A lump sum payment for the entire loan amount paid at maturity. A bullet repayment is often linked to ballon loans or similar products. Bullet repayments are usually built in to the terms of the loans.

For example, when a person has a five-year mortgage which is paid off in a lump sum at the end of the five-year term, this payment is considered a bullet repayment. Generally, the borrower only pays interest during this time, while the principal balance of the loan is due at the end of the term.

For large loan amounts, such as mortgage loans, refinancing is usually required in order to pay the entire bullet repayment amount.