Which type of loan includes periodic payments consisting of both interest and principal repayment?

The correct choice is the type of loan that consists of periodic payments incorporating both interest and principal repayment, known as amortized loans. An amortized loan requires the borrower to make regular payments that cover interest costs as well as gradually pay down the principal amount over the life of the loan.

This characteristic of amortized loans ensures that each payment reduces the outstanding balance of the loan, allowing the borrower to eventually pay off the total principal including interest by the end of the loan term. As a result, borrowers can manage their repayment schedule more effectively, as the payments are structured into equal amounts that change the principal and interest components over time.

In contrast, pure discount loans involve a single payment at maturity without periodic interest or principal payments. Interest-only loans allow borrowers to pay only the interest at first, with the complete principal due at the end of the term, making them different from amortized loans. Commercial loans may take various forms, and while they can use amortization, they are not defined by it. The clarity of periodic equal payments involving both principal and interest distinctly sets amortized loans apart in loan structures.