Balloon Payment Law and Legal Definition. It is a lump-sum principal payment due at the end of a loan. The final balloon payment is based on the residual value that the lender expects the asset to be worth at the maturity of the loan. A balloon payment follows a.
A balloon payment is a larger-than-usual one-time payment at the end of the loan term. If you have a mortgage with a balloon payment, your payments may be lower in the years before the balloon payment comes due, but you could owe a big amount at the end of the loan.
A balloon loan may be useful when the borrower expects interest rates to be low at the end of the term, allowing him/her simply to refinance the loan. However, there is a high risk of default because not all borrowers actually have the cash to repay an entire loan in one payment.
Balloon Loans synonyms, balloon loans pronunciation, Balloon Loans translation, English dictionary definition of Balloon Loans. n a loan in respect of which interest and capital are paid off in instalments at irregular intervals