Balloon Payment

As opposed to installment loans (or fully amortized loans) where all of the payment amounts are fixed, in a balloon payment, a lump sum is paid at the end of a loan's term. The final payment is significantly larger than all of the payments made before it, and as a result it is more risky so it often comes with a higher interest rate. The benefit is that the debtor has a lower initial payment, and typically lower ongoing monthly payments.

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