Balloon Loan

Definition

  • 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.

Synonyms
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.
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