What type of loan allows a developer to reduce the encumbrance on a subdivided tract of land by paying a proportional part of the principal?

A blanket loan is designed to finance multiple properties under a single mortgage, which is particularly useful for developers of subdivided tracts of land. As a developer sells individual lots or parcels, they can use the proceeds to pay down a portion of the loan. This allows for the gradual reduction of the loan’s encumbrance as individual parcels are sold, effectively giving the developer flexibility in managing their financing.

In contrast, other types of loans mentioned do not specifically facilitate this method of reducing the encumbrance through proportional payments on subdivided land. A partial loan typically refers to a loan for only a certain part of the total amount needed, while a proportional curtailment loan focuses on reducing the principal based on specific terms without the context of subdividing lots. A property development loan, while relevant to financing construction, does not inherently possess features that enable gradual encumbrance reduction in the same targeted manner as a blanket loan. Thus, the blanket loan is the most fitting choice for this scenario.