Definition of Balloon payment:
Loan installment (paid usually at the end of the loan period) that is much larger than the other installments. A balloon payment is required when the previous installments did not extinguish the loan, either intentionally or due to an error or late payments.
What is a balloon loan? A balloon loan is set up for a relatively short term, and only a portion of the loan's principal balance is amortized over that period. The remaining balance is due as a final payment at the end of the term.
A repayment of the outstanding principal sum made at the end of a loan period, interest only having been paid hitherto.
A balloon payment is a large payment due at the end of a balloon loan, such as a mortgage, a commercial loan, or another type of amortized loan. It is considered similar to a bullet repayment.
How to use Balloon payment in a sentence?
- Usually, a balloon payment is not used in a typical 30-year home mortgage.
- A balloon payment can be a big problem in a falling housing market when owners might not be able to sell their homes for as much as they anticipated before the payment comes due.
- The required payments are the monthly instalments of principal and interest under the loan, until the balloon payment comes due in March.
- Balloon payments are often at least twice the amount of the loan's previous payments.
Meaning of Balloon payment & Balloon payment Definition