BULLET REPAYMENT
Back to GlossaryDefinition
A single large principal payment due at maturity of a loan or bond.
Summary
A bullet repayment is a loan structure where the borrower pays only interest during the loan term and then repays the entire principal amount in one lump sum when the loan matures. This is different from amortizing loans where principal is paid down gradually over time. The payment structure gets its name because the large final payment 'hits' like a bullet at maturity.
Usage Context
Understanding bullet repayments is crucial when studying loan structures, bond characteristics, corporate financing decisions, and cash flow management. It's particularly important in real estate finance, corporate debt analysis, and investment banking contexts.
Common Confusions
- Confusing bullet payments with balloon payments (balloon payments involve some principal payments during the term)
- Thinking no payments are made until maturity (interest is typically paid periodically)
- Assuming bullet repayment is always risky (it can be appropriate for certain borrowers with predictable cash flows)
- Believing bullet repayment only applies to loans (bonds also commonly use this structure)
