The amount is deferred, not removed
A balloon payment is a lump sum due at the end of the loan term. Regular payments are calculated with that remaining balance in mind. Because principal is paid down more slowly, interest can be higher than an otherwise equivalent loan with no balloon.
Compare the monthly payment, total interest and final amount together. The Atlas equipment calculator lets you change the balloon assumption and see those figures.
Avoid relying on an uncertain exit
Selling the asset may not produce enough to cover the balance. Condition, age, market demand and selling costs can change the outcome. Refinancing is also subject to a future lending decision.
Plan how the final payment would be met if resale values were lower than expected or refinancing were unavailable. A realistic provision over time can make the obligation more visible.
Questions to ask
- What exact amount is due at the end?
- How much does the balloon change total interest?
- Are there fees to settle early or at term?
- Would the balance be covered if the asset sold for less than expected?
- How will the final amount be funded without relying on approval of a new loan?
Common questions
Does a balloon make a loan cheaper?
Not necessarily. It can lower regular repayments while increasing the interest cost.
Can a balloon always be refinanced?
No. A future refinancing request depends on the provider and circumstances at that time.
General information only. Product terms and availability vary. Check the actual proposal and obtain advice appropriate to your circumstances.