Loan structure with principal generally due in one lump sum at maturity instead of being amortized throughout the term.
A bullet loan is a loan structure where the principal is usually repaid in one lump sum at maturity instead of being amortized throughout the term. Borrowers may make periodic interest payments along the way, but the core feature is that most or all principal remains outstanding until the end.
Bullet loans matter because repayment shape changes risk. The structure can ease near-term cash flow pressure for the borrower, but it concentrates refinancing or repayment risk at maturity.
That tradeoff makes bullet loans common in project finance, commercial real estate, bridge situations, and other cases where the borrower expects a future liquidity event rather than steady amortization.
In a simple interest-paying bullet structure:
Where:
P is the principal balance
r is the contractual periodic interest rate
The principal balance stays mostly intact until maturity, when the borrower must repay or refinance it.
| Feature | Bullet loan | Amortizing loan |
| — | — | — |
| Principal repayment | Mostly due at maturity | Paid down gradually |
| Early-period cash burden | Lower | Higher |
| Maturity risk | Higher | Lower |
| Refinance dependence | Often material | Usually lower |
A developer borrows \$5 million for a three-year project. During the term, the borrower pays interest only. At the end of year three, the principal is repaid from a property sale or a refinancing transaction.
That final lump-sum obligation is what makes the loan a bullet structure.
A Balloon Payment can arise after some principal amortization. A bullet loan usually leaves the full principal, or nearly all of it, outstanding until maturity.
The borrower may feel less pressure during the term, but the maturity event can be more dangerous if cash flows disappoint or refinancing markets tighten.
Bullet Repayment: The repayment pattern that defines the structure.
Amortizing Loan: A loan that repays principal gradually instead of in one final lump sum.
Interest-Only Loan: A related structure that may transition into a bullet or balloon-style principal payment.
Balloon Payment: A large final payment that resembles, but does not always equal, a bullet payoff.
Term Loan: The broader lending category that can include bullet repayment structures.