Many such examples exist. Most people like to receive a regular income, and most people, both borrowers and lenders, like to have debts paid off in equal installments over the life of the original loan.

There are good business reasons for this preference. It is good loan management policy to pay off the loan in installments over the original life of the loan. For example, before the Great Depression of the 1930s, many homeowners borrowed money to buy their homes, just as they do now. In those days, however, usually the homeowner just paid the interest on the loan, frequently quarterly, and simply rolled over the mortgage loan when it matured. When the Depression hit, many of these people could no longer pay the interest and could not refinance their mortgages when they came due. As a result, they frequently lost their homes, which they possibly had been living in for many years. They would have been paying for years, and if they had paid down the mortgage gradually over the years, they would have kept their homes because the mortgage would have been paid off or would have had only a small balance remaining. This is one reason for the introduction of the monthly payment self-amortizing mortgages during the 1930s.

Many bond issuers have a sinking fund as part of the bond contract for their new bond issues. A sinking fund is a series of payments that will pay off all or part of...