what is a non amortizing loan 
a non amortizing loan is a type of loan for which payments on the principal are made by lump sum as a result the value of the principal does not decrease at all over the life of the loan popular types of non amortizing loans include interest only loans or balloon payment loans understanding non amortizing loana non amortizing loan has no amortization schedule because the principal is paid off in a single lump sum non amortizing loans are an alternative type of lending product as most standard loans involve an amortization schedule that determines the monthly principal and interest paid toward a loan each month non amortizing loans require their principal to be paid back in one lump sum rather than through regular installments and usually feature a short duration and a high interest rate generally non amortizing loans require higher interest rates because they are usually unsecured and offer lower installment payments reducing the cash flow to the lender since they do not have a basic amortization schedule non amortizing loans can be more complex for a lender to structure if any installment payments are made they must be tracked individually and recorded separately from the principal if a balloon payment is made the lender must determine the interest to be collected with the lump sum when the payment is due types of non amortizing loansballoon mortgages interest only loans and deferred interest programs are three general types of loan products that a borrower can look to for non amortizing loan benefits these loans do not require any principal to be paid in installment payments during the life of the loan some loans may require only the interest payment in installments while others defer both the principal and interest these loans are typically for a short duration as the deferred payment results in higher risk for the lender they are also not typically considered qualified loans a status that would allow them to receive certain protections and be resold in the secondary market 