Definition
Stepped payment
With a stepped-payment loan, a borrower’s monthly payments start low and increase gradually over time. This arrangement can be beneficial for start-up companies with limited financial resources in the beginning.
Stepped-payment loans are riskier than other loan types because it takes longer for lenders to get back their principal (the original amount of the loan). For this reason, lenders tend to only offer stepped payments to well-managed companies and on loans that are secured with high-quality assets–those easy to convert to cash.