What is a balloon payment?

  1. InfoFinder profile image71
    InfoFinderposted 5 years ago

    What is a balloon payment?

  2. Cruncher profile image95
    Cruncherposted 5 years ago

    A "balloon payment" is a larger than usual payment due at the end of a loan such as a mortgage.

    One example of this would be an interest only mortgage - a mortgage where the capital borrowed is not paid off, only interest is paid. See my hub here for more about mortgages: http://cruncher.hubpages.com/hub/How-a-mortgage-works.

    At the end of the loan the borrower would usually have to sell the house to pay back the loan or take out another loan, unless they have other savings that can pay off the loan.

  3. duffsmom profile image61
    duffsmomposted 5 years ago

    A balloon payment is a large payment (and it can be formidably large) at the end of a loan.  Often they will do that to keep the monthly payments lower, the WHAM a big one at the end of the loan.  It is not a wise thing to do because it is easy to forget that payment and you could lose your collateral if you can't make the payment.