24 Hour Loans glossary of financial terms

Balloon Payment

A balloon payment is a payment that is made at the end of a balloon loan?s life. Balloon loans are shorter term loans that give borrowers access to the advantages of long term loan rates and deals. So, with a balloon loan, you will borrow money in the normal manner, make standard repayments for a designated period of time (usually a number of years) but then the money that you owe will become due to be repaid in a lump sum.

This final lump sum repayment is known as the balloon payment. So, if you take out a balloon loan to finance a property, for example, the loan will act as if you are taking out a mortgage for 25 years. You may pay this loan off as usual for a set period of 5 years but then the loan will stop and you will need to make the final balloon payment to repay it in full. This gives you access to shorter term loans at longer term rates.