Balloon Loan

(redirected from Balloon Notes)
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Related to Balloon Notes: Balloon Loans

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 ?
For example, a seller age 60, who sells an asset in August 2003, for $1,000,000 with a 20-year balloon note structured as a SCIN, must use a rate of 5.
But sometimes balloon payments can ruin borrowers who do not have a rising stream of income and who are unduly influenced by the lower short-term cost of a balloon note.
There was no specific language that identified Reverend Hargraves' loan as a balloon note.