A balloon payment is a large payment that is typically due at approximately the halfway point of a loan's term. This payment is in addition to the regular monthly payments and is often used to reduce the overall cost of the loan. Balloon payments are commonly associated with mortgages and car loans.

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A Balloon Payment

Question 77

Multiple Choice

A balloon payment

A) is an up front payment to obtain a loan.
B) may be required by the bank at about midway in the loan term.
C) may be due at any time during the term of a loan.
D) is used to lift (remove) a loan covenant.

Correct Answer: