Balloon payment意思

"Balloon payment" is a term used in finance and real estate to describe a large payment that is scheduled at the end of a loan or lease agreement, typically to pay off the remaining balance of the loan. This payment is usually much larger than the regular payments that have been made throughout the duration of the agreement.

Balloon payments are most commonly associated with adjustable-rate mortgages (ARMs) and commercial real estate loans, but they can also be found in other types of loans, such as auto loans and personal loans. They are less common in traditional 30-year fixed-rate mortgages.

The use of balloon payments can be beneficial for borrowers who are able to afford the lump sum payment at the end of the loan term and who expect to have the funds available. For lenders, balloon payments can be attractive because they provide a guaranteed lump sum of cash at a specific point in the future.

However, balloon payments also carry risks for borrowers. If the borrower is unable to come up with the funds to make the balloon payment when it is due, they may have to refinance the loan, sell the property, or even default on the loan, which can lead to foreclosure or repossession.

It's important for borrowers to carefully consider their financial situation and future plans before agreeing to a loan with a balloon payment, and to make sure they have a plan in place for how they will pay off the loan when the balloon payment comes due.