What payment structure involves only paying the interest with no repayment on the principal?

The payment structure where only the interest is paid without any repayment on the principal is known as an Interest Only Payment. This type of payment structure allows borrowers to pay just the interest on the loan for a specified period, typically after which principal payments commence or the loan may need to be paid in full.

During the interest-only period, the borrower has lower monthly payments, which can be appealing for cash flow management. However, it’s important to understand that at the end of the interest-only period, the borrower will still owe the original principal amount of the loan, and they may be faced with higher payments later on when they start paying down the principal.

The other options represent different payment structures that involve repayment of principal or have different characteristics. For example, an amortizing payment includes both principal and interest within the payment, gradually reducing the loan balance over time. A balloon payment includes a larger lump sum payment at the end of the loan term after making smaller payments initially. Deferred payments push the payment obligation to a later date, typically deferring both principal and interest payments, which does not align with the question asking specifically about paying only interest.