What is a Single Payment Loan?

A single payment loan requires the entire principal, plus any interest, be paid at an exact date when the loan matures. Rather than paying multiple monthly payments, single payment loans assess the entire expense at one time. 

When to Consider a Single Payment Loan

  • When the loan size you require is relatively small, you may pay less interest if you opt for a single payment. For example, you may have $12,000 saved and be looking to put $10,000 toward a purchase like a vacation or an engagement ring. You do not want to exhaust your savings, so you take out a single payment loan. In the future, you will have additional money saved, and can allocate $10,000 to paying off the loan without draining your bank account.
  • If you know you are receiving the sum required to repay the loan, without a doubt, at a date prior to when the loan is called in. This occurs for professionals who receive large year-end bonuses. If you know your bonus is 10% of revenues, and revenues have been $250,000 this year so far, it is safe to take a $20,000-$25,000 loan due after you receive your bonus. If you lose your job or the company begins to lose money, though, you may be in a bad position.

Single payment loans allow the borrower to take on most of the risk. This will make them less expensive, but defaulting can be catastrophic. 

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