Balloon Payment Calculator

The payment is set on a longer amortization period (or interest-only), so little principal is repaid during the shorter term — the principal still outstanding at maturity is the balloon.

Low payments now, a lump sum later

A balloon loan splits a loan into two very different parts: a run of small periodic payments during the term, then one large final payment — the balloon — at maturity. The trick is that the payments are calculated as if the loan ran much longer (say, amortised over 20 or 30 years), or cover only the interest, so barely any principal is repaid during the shorter term. Whatever principal is left when the term ends is the balloon. The appeal is obvious — the monthly payment is far lower than a normal loan — but the catch is just as real: a big sum comes due all at once.

These structures are common in commercial property and equipment finance, and in some auto and mortgage products. This calculator shows the periodic payment, the balloon due at maturity, and how the two compare with a standard fully-amortising loan.

Worked example — a $300,000 loan at 7% over a 5-year term, payments amortized as if 20 years: The payment is about $2,326 a month — far below the ~$5,940 a standard 5-year loan would demand. But after 5 years roughly $258,770 is still owed: that is the balloon you must pay, refinance, or sell to cover.

The three ways to set a balloon

This calculator offers the three structures lenders actually use. “Longer amortization” bases the payment on a longer schedule than the term — the most common commercial setup — and the leftover principal at maturity becomes the balloon. “Set the balloon” lets you name the lump you want to owe at the end, and works out the payment that leaves exactly that. “Interest-only” makes the payment cover just the interest, so no principal is repaid and the balloon equals the entire loan — the lowest payment, the biggest balloon.

Whichever you choose, the pattern is the same: lower payments in exchange for a deferred lump. The calculator shows how much lower your payment is than a standard loan, and the total interest — which is usually higher on a balloon loan, because you carry more principal for longer.

The maturity risk — and refinancing

The balloon is a risk as much as a feature. When it falls due you must do one of three things: pay it from savings, refinance it into a new loan, or sell the asset to cover it. Refinancing is the usual plan, but it assumes you can — rates may be higher then, your finances or the asset’s value may have changed, and credit may be tighter. If you cannot refinance and cannot pay, you face a payment shock or default. The calculator shows the estimated payment if the balloon is refinanced, so you can sanity-check that exit.

Treat the refinance figure as a plan, not a certainty. A balloon loan suits borrowers who expect to sell or refinance before maturity, or who will have the lump available — not those relying on hope. Going in with the balloon size and the refinance payment clearly in view is the whole point of running the numbers first.