What is a promissory note that requires interest payments only called?

A promissory note that requires interest payments only is known as a straight note. This type of note allows the borrower to make only interest payments during the term of the loan, with the principal balance due in full at the end of the term. In practical terms, this means that the borrower does not reduce the principal amount during the loan period, but simply pays the lender interest based on the remaining balance.

This structure is often used in situations where the borrower needs to manage cash flow more effectively in the short term, such as in real estate financing or investment scenarios. The borrower essentially has the benefit of lower initial payments for a period of time, but they must be prepared to pay back the entire principal amount at the end of the loan term.

In contrast, other types of notes mentioned, such as amortized notes, require regular payments consisting of both principal and interest, leading to gradual reduction of the loan balance over time. A variable note would typically involve interest rates that fluctuate based on market conditions, and a balloon note combines elements of both, where a large final payment (balloon payment) is due after a series of smaller, typically interest-only payments.