what is a take out loan 
a take out loan is a type of long term financing that replaces short term interim financing such loans are usually mortgages that are collateralized with assets and have fixed payments that are amortizing take out lenders who underwrite these loans are normally large financial conglomerates such as insurance or investment companies while banks or savings and loan companies usually issue short term loans such as a construction loan understanding take out loansa borrower must complete a full credit application to obtain approval for a take out loan which is used to replace a previous loan often one with a shorter duration and higher interest rate all types of borrowers can get a take out loan from a credit issuer to pay off past debts take out loans can be used as a long term personal loan to pay off previous outstanding balances with other creditors they are most commonly used in real estate construction to help a borrower replace a short term construction loan and obtain more favorable financing terms the take out loan s terms can include monthly payments or a one time balloon payment at maturity take out loans are an important way of stabilizing your financing by replacing a short term higher interest rate loan with a long term lower interest rate one 