A straight loan or interest-only loan (also known as a term loan) is a non-amortized loan that essentially divides the loan into two amounts to be paid off separately. The borrower makes periodic payments of interest only, followed by the payment of the principal in full at the end of the term.
Unlike a straight loan payment, the payment in an amortized loan partially pays off both principal and interest. Most mortgage and deed of trust loans are amortized loans. Regular periodic payments are made over a term of years, generally 15 or 30 years, although 40- and 50-year mortgages are available. Each payment is applied first to the interest owed, the balance of the payment is then applied to the principal amount.