What is a balloon payment?
A balloon payment is a large payment due at the end of a loan. The word balloon refers to the fact that the final payment is large in comparison to the other payments.
You may have a balloon payment for several reasons. For example, you make several late payments so interest accrues on a larger balance. This additional interest is added to the final payment of your loan. To decrease the amount of your balloon payment, you can always pay a little more each month to cover the extra interest that accrued.
Another reason you would have a balloon payment is that you have a balloon loan and agreed to have a large final payment at the end.