A loan that has level monthly payments that will amortize it over a stated term (e.g., 30 years) but that requires a lump sum payment of the entire principal balance at the end of a shorter term (e.g., 10 years).
Unlike an amortized loan, which pays off the principal completely at the end of the loan, a balloon loan leaves a large amount of principal unpaid. Usually, consumers refinance the balloon amount.
long-term loan, often a mortgage, that has one large payment (the balloon payment) due upon maturity. Often done when refinancing or a major cash flow event is anticipated. also called balloon note. see also partially amortized loan, lump sum.