Balloon Payment

A balloon payment is a large lump-sum payment due at the end of a loan term. It is used when earlier payments are set lower than a fully amortized schedule.

Borrowers often plan to refinance or sell the asset before the balloon payment comes due. If they cannot, the loan may default.

Related Terms

Mortgage

A mortgage is a loan used to purchase real estate, where the property serves as collateral. The borr...

Principal

Principal is the original amount of money borrowed in a loan or the original amount invested. It doe...

Interest

Interest is the cost of borrowing money or the return earned on deposited funds, typically expressed...

Amortization

Amortization is the process of paying off debt through regular payments over time. Each payment cove...

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