Balloon Payment

A balloon payment is a large, lump-sum payment due at the end of a loan term. Unlike regular loans with consistent payments that gradually pay off the debt, loans with a balloon payment typically have smaller regular payments and then conclude with one large payment for the remaining balance. This final payment can be much larger than the other payments, hence the name “balloon,” suggesting a sudden swell in payment size. This type of payment structure is often used in mortgage or business financing scenarios where the borrower expects to have a larger sum of money available later on to settle the debt.