Which type of loan requires a large payment at the end of its term?

The type of loan that requires a large payment at the end of its term is a balloon loan. This loan structure is characterized by smaller periodic payments throughout the life of the loan, typically consisting of interest or smaller principal repayments, and then a substantial "balloon" payment that covers the remaining balance due at maturity. This means that borrowers effectively pay less during the term of the loan but must be prepared to make a significant payment at the end, which can require careful financial planning.

Understanding balloon loans is crucial for borrowers to ensure they can meet the larger payment at the end of the term, which may not be manageable if they do not have plans in place for that eventuality. The other types of loans mentioned do not primarily focus on a large final payment in the same manner. For example, mezzanine loans typically involve equity at a higher cost rather than the structure of payments seen in balloon loans, while equity participation loans involve sharing in profits or equity rather than structuring payments. Stand-by loans often provide funds that are only drawn upon when needed, which does not align with the principle of making a significant payment at term's end.