Banking · Loans and Advances
Which of the following accurately distinguishes between 'Bullet' and 'Balloon' repayment methods in project loans?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1A Balloon repayment allows the borrower to skip payments during months of low revenue, whereas a Bullet repayment requires payment only when the underlying asset is liquidated.
- 2A Bullet loan is strictly for short-term working capital, while a Balloon loan is only used for long-term public sector infrastructure projects.
- 3A Bullet repayment refers to the payment of the entire principal amount in a single installment at the end of the tenure, whereas a Balloon repayment involves smaller periodic payments with a significantly larger final installment.✓
- 4A Bullet repayment involves equal monthly installments throughout the tenure, while a Balloon repayment involves paying only interest for the first half.
Correct answer
A Bullet repayment refers to the payment of the entire principal amount in a single installment at the end of the tenure, whereas a Balloon repayment involves smaller periodic payments with a significantly larger final installment.
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