Balloon Payment

Final payment on a loan when that payment is greater than the preceding installment payments and pays the loan in full. For example, a debt requires interest-only payments annually for five years, at the end of which time the principal balance (a balloon payment) is due.

The final payment on a loan, when that payment is greater than the preceding installment payments and pays the loan in full.Example: A debt requires interest-only payments annually for 5 years, at the end of which time the principal balance (a balloon payment) is due, as seen in Figure below.