What does a straight note typically require in terms of payment?

A straight note, often used in financing arrangements, primarily requires interest-only payments throughout the life of the loan. This means that the borrower pays just the interest charged on the principal balance, typically at regular intervals, but does not pay down the principal itself during this period. At the end of the term, the entire principal amount is due in a single payment.

This characteristic of a straight note distinguishes it from amortized loans, where borrowers pay both principal and interest, gradually reducing the loan balance over time. In a straight note, because there are no regular principal repayments, the total amount due at the end (the balloon payment) can be significantly larger than in an amortized scenario. Thus, those looking to understand straight notes should focus on the structure of interest payments, recognizing that payments consist of interest only until the principal is due.