Usually equal instalments over the period of the loan. In
the London or Eurodollar market, instalments are usually every six months. If lending
policy does not allow a loan over a sufficient period of time necessary for the
vessel to repay its debt, a ‘balloon’ repayment may be used as a way of keeping
annual principal repayments to a manageable level. For example, a newbuilding
might be paid off over 8 years, but with a 30 per cent ‘balloon’ payment at the
end. This reflects the banker’s confidence that the ship will have a significant asset
value at the end of its tenor. For older vessels the balloon is often related to the
predicted scrap value