What type of loan requires the principal to be repaid at the end of the period without periodic interest payments?

A pure discount loan, also known as a zero-coupon loan, is characterized by its structure where the principal amount is repaid in a lump sum at the end of the loan term, without any periodic interest payments being made throughout the duration of the loan. Essentially, the borrower receives an amount less than the face value of the loan at the outset and repays the full face value at maturity. The difference between the initial loan amount and the face value represents the implicit interest earned by the lender.

In contrast, an amortized loan involves regular payments of both principal and interest over the life of the loan, which leads to the loan being fully paid off by the end of the term. An interest-only loan allows the borrower to pay only the interest during the loan period, with the principal being repaid at the end. An installment loan entails making periodic payments that cover both the principal and interest, similar to an amortized loan structure. Each of these types of loans differs significantly in payment structure and timing compared to a pure discount loan, which is uniquely defined by the absence of interim interest payments and the lump-sum repayment of principal.