Balloon payment - Financial definition
Concise definition of the term balloon payment
A balloon payment is a large lump-sum payment made at the end of a loan term.
Comprehensive definition of the term balloon payment
A balloon payment is a significant sum repaid at the conclusion of a loan period, typically associated with installment loans or mortgages. It allows for smaller periodic payments throughout the loan term, with the balloon payment covering the remaining principal balance. This structure often appeals to borrowers seeking lower initial payments but entails higher risk, as failure to secure funds for the balloon payment may lead to refinancing or default.