Balloon Loan

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Balloon Loan

A loan or bond in which the borrower makes only interest payments for a set period of time. At the end of the term, the borrower repays the entire principal at once. A balloon loan may be useful when the borrower expects interest rates to be low at the end of the term, allowing him/her simply to refinance the loan. However, there is a high risk of default because not all borrowers actually have the cash to repay an entire loan in one payment. See also: Balloon Mortgage.
References in periodicals archive ?
Depending on the market and manufacturer, leasing and balloon loans can make up nearly 60% of total car sales.
Increased Credit Union Signings Indicate Balloon Loan Program Success
The delinquency index reflects delinquent loans for 60 days or longer, matured balloon loans and the current month's repurchased assets.
Typically, Aspire's taxicab medallion loans are three-year or five-year balloon loans.
Eight loans are fully amortizing and 73 are balloon loans.
New delinquent assets in October consisted of five matured balloon loans, four credit impaired securities, and two term defaults.
Approximately 50% of the initial fixed-rate loan balance were balloon loans.
Although commonly used for second and commercial mortgages, balloon loans have only recently made their debut as a financing tool for first mortgages.
Among the newly delinquent assets were three matured balloon loans, six new credit impaired securities, and two term defaults.
The increase in delinquencies was tempered by the resolution of 12 other previously delinquent assets, including extensions of two former matured balloon loans.
All of the mortgage loans are fixed-rate amortizing balloon loans.
The CREL delinquency index includes loans and assets that are currently 60 days or longer delinquent, matured balloon loans, and the current month's repurchased assets.