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A "balloon payment" is a final, usually quite large, payment on a loan. Essentially what you're doing in such a loan is taking a (slightly) smaller monthly payment in exchange for having to come up with a large lump sum of cash at the end.

Generally speaking these aren't such a good idea for a typical borrower. The question to ask is "If I don't have the balloon payment sitting in my account right now, what reason do I have to think I will have it when it comes due?" If you can think of a very good reason (such as "By the time the balloon payment comes due my house will have sold/my bonds will have matured/I can use the money from my Certificates of Deposit without the Substantial Penalty for Early Withdrawal") then maybe the balloon payment loan does make sense. Otherwise you're probably better off avoiding them.

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15y ago

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What term refers to a large final payment due at the end of a loan?

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What terms refers to a large final payment due to the end of a loan?

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Can you pay off a balloon loan early?

Yes, you can pay off a balloon loan early by making a lump sum payment of the remaining balance before the final balloon payment is due. This can help you save on interest costs and avoid potential financial risks associated with the balloon payment.


What does the concept of ballooning refer to?

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Is a balloon payment calculator really a balloon?

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What terms refers to a large final payment due at the end of a loan?

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Balloon payment you have a balloon mortgage payment and you lost your job how can you get help?

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Have you ever heard of a balloon payment at the end of a purchase to buy of a used car?

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A balloon payment is calculated by determining the total loan amount, the interest rate, and the loan term, typically with a schedule that includes smaller regular payments followed by a larger final payment. To create a balloon payment structure, lenders often use amortization formulas to establish the monthly payment amounts, which cover interest and a portion of the principal, leaving a significant balance due at the end of the term. This approach is common in loans where borrowers expect to refinance or sell the asset before the final payment is due.


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