balloon loan

You borrow $10,000.00 on a 12 month term, for example. You do not have to pay anything til the 12 months is up, then you owe the entire balance and the interest all at once. Balloon payment.

its a loan that starts off with an interest only payment thats like $200-700 depending the price of the home. then after a period of 1-5 years the payment balloons to $1700+ leaving alot of people dumbstruck and unable to pay for their dream home.

defers a large portion of the payments to the end of the loan, when a large payment becomes due. Payments might be 100 a month for 36 months, with a balloon of 1000 due at the end of the loan.

Here is an example:

l just got to the end of my 4 year truck lease. l had the options of refinancing to buy, making a balloon payment and it was mine, or turning it in to the dealership. l gave it back. My balloon payment was a HUGE final payment of $11,000.00 (USD). So balloon payments are generally massive as compared to the monthly payments.

To make a simple explanation would be like this:
You get a loan for $5000.
You pay less then you normally would every month (this is where you can save some money.)
Then by a specified date, you have to make a very large payment to pay off the note, hence the term ''balloon payment''

Hope this your question.

Say like you take out a loan for one year and this loan is for $20k.
Your note states you will pay $1k each month for 12 months. If there is any money due at the end of the loan term, and we know that you did not pay for $8k, then the money owned after 12 months is considered the balloon payment.

A baloon loan is one in which the entire amount of the loan is due on a certain date, rather than being spread out in monthly payments.
Example #1:
You borrow $10,000 from ur bank. The bank agrees that instead of monthly payments, they will expect u to repay the $10,000 + interest one year from the date u originate the loan.

Example #2: You borrow $10,000 from ur bank on February 1, this year. You & the bank agree that on Feb 1 of each succeeding year, u will pay them $1,000+ interest. You will do this for 4 years, but on Feb 1 of the 5th year, the $6,000 balance + interest will be due & payable.
These r both examples of a baloon loan. The baloon payment is the amount of the loan due & payable at the end of the loan, when the amount baloons.

As futher explanation, we usually think of paying loans back in monthly installments, or other types of installment repayment plans. A baloon loan is one that is generally not paid back in installment payments, but the entire amount is due & payable on a certain date.