End Loan – Definition

Cite this article as:"End Loan – Definition," in The Business Professor, updated September 20, 2019, last accessed November 26, 2020, https://thebusinessprofessor.com/lesson/end-loan-definition/.


End Loan Definition

An end loan is a particular form of long-term loan that a person borrows for repaying a construction loan in the short-run, or some other kind of interim financing.

A Little More on What is an End Loan

An end loan offers several features including interest-only which gives the payer leverage for repaying the principal amount. However, it starts to amortize or decrease at a certain point in time. This concept works differently as compared to the loans taken for construction projects, or different types of interim financing, that follow the criterion of interest-only loans. Such loans ask the borrower to repay the complete principal amount as well as accrued interest on allocating finances from the end loan.

An end loan can include a portion of a combination or construction end loan. This lets the borrowing party to deal with a single lender instead of multiple ones. While dealing with one lender, the borrower needs to register for a single application to apply for loan, and usually pays expenses related to loan settlements just once. But there is one major drawback of entering into the end loan with a single lender, that is the borrowing party or debtor doesn’t have much options to explore post the interim financing stage.

As an end loan offers the borrower to make payments at a lesser interest rate than the financing, they can consider using it for repaying interim loans financed for the short-run.

How borrowers use end loans

End loans are offered to individuals who seek short-term loans, especially the construction-based loans that they usually borrow for creating a beautiful house, or investing in the real estate industry. In terms of availability of finances, construction projects are more feasible and approachable as compared to other funding forms. However, this ease in availability usually comes with more interest rates. As per the lenders, such loans are riskier in nature than a basic mortgage. Also, the lending parties can add their terms and conditions on repaying criterion. For instance, asking the borrower to repay the whole amount at the time of completion of the project, or to pay a specific amount of money on top of interest.

Builders usually take construction loans for constructing new houses. Besides, home buyers also consider taking such loans for renovating their homes. The borrowing party has the option of refinancing the loan after the construction process winds up. The more interest rates levied on construction loans tempt buyers to choose this type of financing. They borrow the end loan, and further utilize it for repaying their construction loan. The variations in rates of interests of the two loans ultimately helps them in saving a lot of money.

References for “End Loan”






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