what is a balloon loan

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Short-term mortgage

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  • What is a balloon payment on a loan?

  • Updated Apr 13, 2019. A balloon loan is a type of loan that does not fully amortize over its term. Since it is not fully amortized, a balloon payment is required at the end of the term to repay the remaining principal balance of the loan.

  • How long does a balloon loan last?

  • Balloon loans often extend for about five to seven years, though term lengths do vary, and the balance of the mortgage loan is due at the end of the term; the debt is not cleared with a final installment payment. In the mortgage world, the end of the loan term is called maturity.

  • What is an auto balloon loan?

  • A balloon loan allows you to finance a car with monthly payments that are usually lower than the payments you鈥檇 make with a traditional auto loan. But an auto balloon loan also comes with risks.

  • Are balloon loans a good idea?

  • Balloon loans are a mixed bag. They offer the rare opportunity for many people to get by on small monthly payments in the present and near future. Then down the line, they鈥檙e able to tackle a large singular payment down the line.

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