If a loan has a fixed interest rate with level monthly payments and a balloon payment at the end of the term, what type of loan is this?

The correct identification of the loan type described in the question is a partially amortized loan. In this type of loan, the borrower makes regular monthly payments that cover only a portion of the principal along with interest during the loan term. As a result, at the end of the term, a balloon payment is due, which is a larger sum that covers the remaining unpaid principal.

In contrast, a fully amortized loan would require monthly payments that ensure the loan balance is completely paid off by the end of the term without any remaining balance. An interest-only loan entails payments that only cover the interest during the term, leaving the principal due in full at the end, but it does not involve level monthly payments of principal. Variable-rate loans, on the other hand, have interest rates that can change over the life of the loan, which is unrelated to the fixed payments and characteristics specified in the question.

Understanding these distinctions emphasizes why a partially amortized loan is characterized by fixed payments over time, culminating in a significant balloon payment at maturity.