A loan in which the borrower makes periodic payments of interest, and principal becomes payable in full in one installment at the end of the loan, is known as a negative amortized loan.

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A negative amortized loan is one in which the periodic payments of interest are not enough to cover the accruing interest, resulting in the unpaid interest being added to the principal balance. This means that the borrower ends up owing more than the original amount borrowed at the end of the loan term. In such loans, there is usually no single balloon payment of principal due at the end of the loan term.

A Loan in Which the Borrower Makes Periodic Payments of Interest