Future Business Leaders of America (FBLA) Business Calculations Practice Test

An interest-only loan typically has the lowest monthly payments compared to other types of loans. With this type of loan, borrowers are only responsible for paying the interest on the amount borrowed for a set period, usually the first few years of the loan term. This arrangement significantly reduces the monthly payment amount since the principal balance is not being paid down during this time.

In contrast, both adjustable-rate and fixed-rate loans require regular principal and interest payments, leading to higher monthly payment amounts. While adjustable-rate loans may start with lower initial payments that can change over time, they eventually require both interest and principal payments, which can increase the total monthly payment. A variable-rate loan also follows a similar structure to an adjustable-rate loan, where the monthly payments include both interest and principal, typically leading to higher payments than those found in an interest-only loan.