What type of note requires periodic payments of principal only?

The correct answer is that an installment note requires periodic payments of principal only.

In an installment note, the borrower pays back the principal amount in regular installments over a specified period. While some installment notes may also combine interest payments with these principal payments, the type of payment structure indicated in the question specifically highlights periodic principal payments, which aligns with what an installment note generally facilitates.

In contrast, an amortized note typically combines both principal and interest into a single regular payment, which gradually pays off both components over time. An adjustable rate note features interest rates that can change at specified intervals, impacting the payment structure but not exclusively focusing on principal repayments. A straight note, often referred to as a non-amortizing note, usually requires only interest payments during the term; the entire principal is repaid at the end, rather than having periodic principal payments throughout the term.

Thus, an installment note is the term that best describes a loan structure specifically designed for periodic payments of principal only.