Which type of loan involves repayment of both principal and interest remaining the same for each payment period?

The correct answer is fully amortized loan. In a fully amortized loan, each payment reduces the principal balance as well as covers interest, resulting in equal payments over the life of the loan. This structure provides predictability for borrowers, as they can plan their budgets knowing exactly what their payment amount will be throughout the entire term of the loan.

This type of loan is particularly attractive because it allows borrowers to gradually build equity in their property over time. With each regular payment, a portion goes towards the principal, thereby decreasing the amount owed on the loan until it is fully paid off by the end of the loan term.

In contrast, other loan types differ significantly in their repayment structures. A balloon mortgage loan typically involves smaller payments for a set period, followed by a large final payment (the "balloon") that covers the remaining balance. An adjustable rate mortgage (ARM) features payments that can fluctuate based on changes in interest rates, which means that payment amounts are not consistent. Lastly, an interest-only loan allows the borrower to pay only interest for a certain period, meaning they do not reduce the principal balance during that time, thus not following the same consistent payment structure as a fully amortized loan.