A balloon payment is a lump-sum payment at the end of a term for a loan. Example: A borrower takes out a 10,000 loan that matures in five years that does not fully amortize before the maturity date. This means a loan balance remains at the maturity date, that balance is the balloon payment. Example: An interest only loan for $10,000 that matures in five years, contractually has the remaining $10,000 left at the end of the term of the loan. That $10,000 therefore becomes the balloon payment in five years.
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