Balloon Loan

A balloon loan is a type of loan that has a large payment due at the end of the loan term, typically referred to as the "balloon payment." Unlike conventional loans where regular monthly payments are made over the loan term, a balloon loan features smaller monthly payments followed by a significant final payment. The structure of a balloon loan involves paying off only a portion of the principal balance during the loan term, which results in lower monthly payments compared to a fully amortized loan. However, at the end of the loan term, the borrower is required to make a lump sum payment to satisfy the remaining balance.