# Balloon Payment

*Borrowing & Credit — Finicade finance glossary*

A balloon payment is a large lump sum due at the end of a loan whose regular payments were too small to repay it. It buys a low monthly payment by deferring most of the principal — common in commercial mortgages, some car finance and short-term business loans. The risk is refinancing risk: the plan is almost always to refinance or sell before the balloon lands, and that plan fails exactly when credit conditions tighten or the asset's value has fallen.

**Also known as:** balloon loan, bullet repayment

**Related terms:** [Amortization](https://finicade.com/glossary/amortization), [Auto Loan](https://finicade.com/glossary/auto-loan), [Refinancing](https://finicade.com/glossary/refinancing), [Installment Loan](https://finicade.com/glossary/installment-loan), [Adjustable-Rate Mortgage (ARM)](https://finicade.com/glossary/adjustable-rate-mortgage)

Source: https://finicade.com/glossary/balloon-payment