A larger payment due at the end of a loan or lease term after smaller regular payments.
For example, a restaurant finances its renovation with a 5-year loan that has low monthly payments of $800, but a final balloon payment of $45,000 due at the end of the term when the business expects a major influx of cash.
Why it matters: It keeps regular monthly payments low, but requires the borrower to be prepared for a large lump-sum payout at the end of the term.
.avif)
.svg){kind=small}