What typically characterizes a straight loan?

A straight loan, also known as an interest-only loan, typically involves a payment structure where the borrower pays only the interest on the loan for a specified period, resulting in a lower initial payment compared to amortized loans. This means that while the initial payments may be manageable, the total amount of interest paid over the life of the loan can be higher than in an amortized loan, where both principal and interest are paid down concurrently.

Since straight loans do not reduce the principal balance during the interest-only period, borrowers face a higher total repayment amount when the principal is eventually due. This characteristic of having higher total interest costs compared to amortized loans solidifies the understanding of how payment structures affect long-term borrowing costs.

Although straight loans may offer lower initial payments, the possibility of accumulating more interest expense makes option C significant in comprehending the implications of choosing this type of loan. Understanding these nuances helps borrowers make informed decisions about which loan structure may best fit their financial situation and long-term goals.