Bullet

Written By
Paul Tracy
Updated July 6, 2021

What is a Bullet?

Bullet is usually short for bullet payment, which is typically a large payment made near the end of a loan that does not amortize over time.

How Does a Bullet Work?

Unlike a loan whose total cost (interest and principal) is amortized – that is, paid incrementally during the life of the loan -- a bullet loan's principal is paid in one sum at the end of the term. That sum is called the bullet. Sometimes the interest is collected as part of the bullet payment as well, though in many cases the loan is interest-only during the term of the loan with only the outstanding principal due at the end.

Suppose someone takes out a loan for $1,000 that must be repaid in one year at an interest rate of 10% compounded annually. If the loan has a bullet, this person would have to pay $1,100 ($1,000 in principal plus $100 in interest) in one payment at the end of one year.
 

Why Does a Bullet Matter?

Loans with bullets have the advantage of not having to immediately begin paying back the loan. This can be preferable for companies that do not anticipate having enough cash flow in the near future. The borrower must, however, be prepared to repay the principal and interest in its entirety at the end of the term.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Bullet.
Be the first to ask a question

If you have a question about Bullet, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Bullet, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Bullet

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms