What is a balloon payment?

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A balloon payment is a large payment due at the end of a balloon loan, such as a mortgage, commercial loan, or other amortized loan.

A balloon loan typically features a relatively short term, and only a portion of the loan's principal balance is amortized over the term. At the end of the term, the remaining balance is due as a final repayment. On installment loans without a balloon option, a series of fixed payments are made to pay down the loan's balance. Balloon payments allow borrowers to reduce that fixed payment amount in exchange for making a larger payment at the end of the loan's term.

In general, these loans are good for borrowers who have excellent credit and a substantial income.