- This type of loan is not designed to be repaid in full through periodic payments at the end of the loan term. When the term ends, a balloon payments is due. This means that one larger payment is made to pay off the remaining principal.
large payment loan, huge
Related Terms and Acronyms
- Balloon Mortgage — Definition,
- A loan that has regular monthly payments which amortize over a stated term but call for a final lump sum (balloon payment) at the end of a specified term, or maturity date, such as 10 years.
- Balloon Payment — Definition,
- A loan instalment that is larger than the other, periodic payments and pays off the remaining principal.
- Fixed Instalment — Definition,
- Periodic (usually monthly) payment on a loan whose sum does not vary.
- Loan Term — Definition,
- The period specified in the promissory note for a borrower to pay a loan, such as a mortgage. Most conventional mortgages have a loan term of 5 or 10 years.
- Lump Sum Payment — Definition,
- An extra payment made to reduce a loan.
- One-time single-sum payment or payout.
- Pre-payment — Definition,
- Applying additional payments towards the balance of a mortgage loan.
- Principal — Definition,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
- Step-rate Mortgage — Definition, Important,
- A fixed-rate home loan on which payments are lower at the beginning, typically for two years, and which then rise.