In fine loans: mechanisms and risks explained

In fine loans are a technical financing mechanism where the borrower pays only interest during the term of the loan, with the full principal amount due in a single lump sum at maturity. This structure differs from amortizing loans, which involve progressive capital repayments.

These loans often rely on collateralization (nantissement), where an existing investment, such as life insurance or a securities portfolio, serves as a guarantee for the loan. While this can serve as a lever for investors to maintain placements while financing new purchases, it carries risks, particularly if the value of the collateralized asset decreases significantly.