Balloon payment
A large final loan payment that's significantly bigger than the regular monthly payments. Common on some commercial loans, short-term mortgages, and certain auto loans; rare on personal loans.
Full definition
A balloon payment is the final loan payment, structured to be substantially larger than the regular monthly payments. Typical structures: a 5-year loan where monthly payments amortise as if it were a 30-year loan, with the remaining balance due in full at month 60. Used to give borrowers a low monthly payment in exchange for refinancing or paying off the balance later. Mainstream U.S. personal loans don't use balloon payments. Some commercial loans, owner-financed real estate deals, and certain auto loans do.
- Written by
- Get Advance Loan Editorial Team
- Reviewed by
- Compliance Review
- Published
- January 15, 2026
- Last reviewed
- May 22, 2026
- Installment loanA loan repaid in fixed monthly payments over a set term. Personal loans, auto loans, and mortgages are all installment loans.
- Revolving creditCredit you can repeatedly draw on up to a limit, with a minimum monthly payment based on the current balance. Credit cards and HELOCs are revolving.
- Prepayment penaltyA fee some lenders charge if you pay off the loan before the scheduled end of the term. Most U.S. personal loans do not have one.
- Late feeA fee charged when you don't make a loan payment by its due date. Typically $15 to $40 depending on the lender and state.
- DelinquencyMissing a scheduled payment by 30 days or more. Reported to credit bureaus and a major negative factor in credit scoring.
- DefaultFailure to repay a loan according to its terms. Usually declared after 90 to 120 days of missed payments, depending on lender and product.
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