Will a straight loan generally cost more to repay than an amortized loan?

A straight loan typically costs more to repay than an amortized loan because of the way the payments are structured. In a straight loan, the borrower only pays interest on the principal throughout the loan term, and at the end of the term, the entire principal amount is due in a lump sum payment. This means that while the monthly payments may be lower than those of an amortized loan, the borrower will end up paying more in total interest over the life of the loan since the principal balance remains unchanged until the end.

In contrast, an amortized loan involves monthly payments that cover both principal and interest, gradually reducing the loan balance over time. As a result, the borrower pays interest only on the remaining principal, which decreases with each payment. This leads to a lower total interest cost compared to a straight loan, making amortized loans generally more cost-effective in the long run.

Therefore, the correct answer highlights that a straight loan usually incurs more costs over time, primarily due to its structure of interest-only payments and a final lump sum principal repayment.