Bullet Loan Calculator

Bullet Loan Knowledge Base

• 1. What is a bullet loan?
  A bullet loan requires only interest payments during the loan term, with the entire principal due at the end.
• 2. How does it differ from a balloon loan?
  They are similar, but bullet loans usually imply no interim principal payments, while balloon loans might include some partial repayments.
• 3. Why choose a bullet loan?
  It helps manage cash flow when a borrower expects a large income or asset sale later to pay off the principal.
• 4. Are bullet loans risky?
  Yes, because a large lump-sum payment is due at the end; failure to plan could lead to refinancing challenges.
• 5. Where are bullet loans used?
  Common in corporate finance, real estate, or short-term borrowing with structured payoffs.
• 6. How is a bullet loan calculated?
  Most bullet loans use compound interest, where no payments are made until maturity. The final lump sum includes both the original principal and the accumulated interest over the loan term. The standard formula used is: A = P * (1 + r/f)f*t, where P is the principal, r the annual interest rate, f the compounding frequency, and t the number of years.