DEFINITION of 'Standing Loan'

A type of loan where payments are made of interest only. Repayment of principal is required only at the end of the loan term. A standing loan is primarily used in real estate or automobile loans. This type of loan is less common, since most lenders are more comfortable with traditional amortizing loans, where principal is paid off gradually over time.

BREAKING DOWN 'Standing Loan'

A standing loan can be advantageous for certain borrowers, because the monthly payment is considerably lower. However, the borrower must have sufficient financial means to pay the full amount of the principal at the end of the loan term. Standing loans are generally considered more risky for the lender and thus usually come with a higher interest rate than a comparable amortizing loan.

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