how do borrowers use non amortizing loans 
non amortizing loans are commonly used in land contracts and real estate development financing in these situations borrowers typically have limited immediate collateral that can be used specifically when a residential or commercial building is being built on a tract of land a non amortizing loan provides the borrower with a specific amount of time to build a property after which the borrower can potentially refinance or obtain a takeout loan with better loan terms using the newly built property as the collateral these types of loans proliferated in the era preceding the financial crisis of 2008 when rogue mortgage industry practices became widely used to lure consumers to take on mortgages beyond their affordability special considerationsgenerally non amortizing loans can serve borrowers in special situations these loans give a borrower a specified timeframe within which to repay the principal without the need for monthly installment payments this can help borrowers who plan to save on their own over the life of the loan these products can also target borrowers who have prospects for increasing their monthly income during the loan s timeframe 