Which loan type is designed to be fully amortized over a long term and repaid in equal payments?

• A. Partially amortized loan
• B. Open end loan
• C. Fully amortized loan
• D. Straight loan/term loan

Answer: (C)

The main idea here is how the loan is paid off over time. A fully amortized loan is designed so each payment covers both interest and a portion of the principal, and the payments are equal throughout the term, so the entire loan is paid off by the end. This is why it’s the best fit for “repaid in equal payments over a long term.” In contrast, a partially amortized loan leaves a remaining balance at the end, creating a balloon payment. An open-end loan is a revolving line of credit, not a fixed amortization schedule, and a straight loan typically involves interest-only payments with the principal due at the end, so it isn’t paid off by equal installments.